Nuveen raises $290 mil in muni fund offering

Nuveen Investments said it raised $289.5 million in an initial public offering for a municipal bond closed-end fund.

The Nuveen Enhanced Municipal Value Fund's portfolio will consist primarily of tax-exempt, investment-grade municipal bonds, the company said today in a statement. Bank of America- Merrill Lynch led the syndicate that underwrote the issue.

Municipal closed-end funds are attractive because the yield curve, or the difference between short- and long-term tax-exempt yields, is about 4 percentage points, or 400 basis points. Municipal closed-end funds, which often borrow money to boost returns, returned 35.8 percent through Sept. 1, according to Bloomberg data. Open-end municipal funds, which don't use leverage to the same degree, returned 11 percent.

"Closed-end municipal bond funds have had a very good year," said Cecilia Gondor, a closed-end fund analyst for Thomas J. Herzfeld Advisors Inc. in Miami. "The leverage has boosted the income to the common shareholders and that has allowed the funds to increase their dividend payouts."

Municipal bonds have recovered this year as investors, looking for stable returns and anticipating higher taxes, poured record amounts of cash into tax-exempt mutual funds. At the same time, the supply of tax-exempt bonds declined as states and cities sell more taxable debt to take advantage of federal subsidies under the Build America Bonds program.

"With interest rates at historically low levels, we believe that investors have been seeking strategies that can enhance their portfolio income," Bill Adams, executive vice president of Nuveen Investments, said in the statement.

Chicago-based Nuveen is the largest manager of closed-end funds. Closed-end funds are mutual funds that have a fixed number of shares. They usually trade on a stock exchange.

Shares of Nuveen's Enhanced Municipal Value Fund, with the symbol NEV, rose to $15.01 at 10:56 a.m. in their first day of trading on the New York Stock Exchange.