Grail Advisors Is Set To Begin Trading The “Grail McDonnell Intermediate Municipal Bond ETF” (GMMB) Tomorrow January 29th

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January 28, 2010 12:08pm NYSE:GMMB

new5Grail Advisors is set to begin trading the “Grail McDonnell Intermediate Municipal Bond ETF” (GMMB) tomorrow January 29th. Grail states in the prospectus that the investment objective of this fund is to provide


 a high level of current tax-exempt income and higher risk-adjusted returns relative to its benchmark. The fund’s benchmark is the “McDonnell’s National 3-15 Year Municipal Performance Composite.” This ETF is actively managed and is not an index fund and thus do not seek to replicate the performance of a specified index.

PRINCIPAL INVESTMENT STRATEGIES

The ETF invests, under normal circumstances, at least 80% of its net assets (plus the amount of any borrowings for investment purposes) in debt securities with interest payments exempt from federal income taxes. The ETF will typically invest in municipal securities and will invest, under normal market conditions, primarily in tax exempt general obligation, revenue and private activity bonds and notes, which are issued by or on behalf of states, territories or possessions of the U.S. and the District of Columbia and their political subdivisions, agencies and instrumentalities (including Puerto Rico, the Virgin Islands and Guam). Tax-exempt means that the bonds pay interest that is excluded from gross income for regular federal income tax purposes. The ETF’s investments generally include municipal securities with a full range of maturities and broad issuer and geographic diversification. While the ETF may invest in securities of any maturity, under normal circumstances, the dollar-weighted average maturity of the portfolio is expected to range from three to ten years.

McDonnell, as the ETF’s sub-adviser, employs a total return investment strategy which emphasizes sector and security selection and yield curve positioning. Sector and security decisions are reached through robust fundamental credit analysis as well as an assessment that incorporates the sector and security’s credit momentum. The total return strategy places a limited dependence on adjusting the portfolio in anticipation of a change in the level of interest rates.

The ETF invests primarily in investment grade securities, which are securities rated in one of the top four credit quality categories by at least one nationally recognized statistical rating organization rating that security (a “rating agency”). The ETF considers pre-refunded bonds or escrowed to maturity municipal securities, regardless of rating, to be investment grade securities. The ETF may invest up to 20% of its net assets in high yield securities or below investment-grade securities rated BB+ (or comparable) or below by a rating agency or, if unrated, determined by McDonnell to be of comparable quality.

The ETF may invest up to 20% of its assets in taxable debt securities. These may include securities issued by the U.S. Government, its agencies and instrumentalities, corporate debt securities, mortgage-backed and other asset-backed securities, and securities of other investment companies, including other ETFs. The ETF may only invest in U.S. dollar-denominated securities.

The ETF may invest in derivative instruments, such as futures and interest rate, total return and credit default swaps. Investments in derivatives must be consistent with the ETF’s investment objective and may only be used to manage risk and not to enhance leverage. Use of certain derivative instruments may give rise to taxable income.

Unless otherwise stated, all percentage limitations on ETF investments apply at the time of investment. Under adverse market conditions, the ETF may, for temporary defensive purposes, invest up to 100% of its assets in cash or cash equivalents, including investment grade short-term obligations. To the extent the ETF invokes this strategy, its ability to achieve its investment objective may be affected adversely.

FEES AND EXPENSES

Shareholder Fees (fees paid directly by Authorized Participants)

 

 

 

Sales Charge (load) Imposed on Purchases:

 

None

 

Transaction Fee on Purchases and Redemptions:

 

Varies

(1)

Annual Fund Operating Expenses (expenses that are deducted from ETF assets)

 

 

 

Management Fee:

 

0.30

%

Distribution and/or service (12b-1) fees: (2)

 

0.00

%

Other Expenses: (3)

 

0.28

%

Total Annual Fund Operating Expenses:

 

0.58

%

Less: Expense Reduction/Reimbursement: (4)

 

0.23

%

Net Annual Operating Expenses: (4)

 

0.35

%

 

 

 

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