Nuveen Select Maturities Municipal Fund (NIM)

Nuveen Select Maturities Municipal fund is a Muni bond closed end fund (i.e. municipal bond CEF). Closed End Fund, also known as CEF, is a publicly traded investment fund which invests in stocks and bonds securities. If you are interested in short term municipal bond fund investment, investor should consider this Nuveen fund.

Nuveen fund holdings

This Nuveen Select Maturities Municipal fund objective is to provide current income exempt from regular federal income tax, consistent with the preservation of capital. It also has a secondary objective to provide portfolio value enhancement. The fund will invest majority of its assets in investment grade rated municipal debts (Baa and BBB or better). It may invest small part of its assets (<20%) in unrated municipal bonds / obligations.

Since 2007, the fund has been managed by Paul Brennan. The fund total common net assets are $123 million. The fund also charges an annual expense ratio of 0.58%. There is only baseline expense and there is no interest expense as of March 31, 2011. The fund has a distribution rate of 4.34% (6.68% taxable equivalent yield based on 35% federal tax rate). The average coupon is 4.89%. The fund average duration is 3.67 years. The average maturity is 11.22 years. There are 161 bonds in this fund. The 5 % annual portfolio turnover is low. The average credit rating of this fund is AA-.

Distribution history

As of March 2011, the fund asset allocation includes municipal bonds (98.7%), and cash (1.3%). The fund top 10 sectors include limited tax obligation (18.09%), U.S. guaranteed bond (17.35%), utilities bond (16.43%), general tax obligation (9.45%), health care (8.61%), transportation (7.60%). education and civic organization (5.1%), long term care (4.53%), consumer staples (4.37%), and water & sewer (3.58%). Top 6 state allocations are Illinois (14.59%), Colorado (12.03%), Pennsylvania (7.4%), Texas (6.7%), and Florida (6.35%).

As of March 28, 2011, the fund has returned -3.80% over the past year and 4.15% over the past 3 year. On the longer term, the fund has returned 3.88% over the past 5 year and 3.68% over the past decade.
Reason to invest in this Muni bond fund:

1. It has short average duration. Low risk to interest rate hike.
2. The fund market price trades at a 3.67% discount to its underlying assets or NAV
3. It pays a distribution which is tax free
4. This is a non leverage municipal bond closed end fund

Risks:

1. Due to underperform its index this past year, will the fund manager change his strategy? The average duration has increased slightly since September 2010 (3.42 years to 3.67 years)
2. Is there any interest rate hikes? If so, how much?

Disclosure: None