16Rock, an affiliate of New York-based SEC-registered investment advisor 16th Amendment Advisors, is launching a new actively managed, unconstrained, absolute return strategy, which will look to capitalise on opportunities in the "highly fragmented" US municipal bond market.

Under the leadership of chief investment officer James Pruskowski, previously global CIO for municipal bonds, institutional & wealth management at BlackRock, and portfolio manager and chief executive officer Jed McCarthy, the fund is launching on 1 July with internal seed capital of $4 million.

The strategy, which has an expected allocation up to 50% in taxable municipal bonds, and 25% in high yield municipals, with a duration of between 0 to 10 years, is targeting annual net returns of 8-10%, net of fees.

According to 16Rock, the strategy will combine "top-down relative value assessment of sectors and credits with bottom-up quantitative assessment of capital structure and qualitative perspective of management and industry",  
and will employ hedging primarily via US treasury futures, options, ETFs, and total-return swaps.