Fund Times: Barclays Delivers First Silver ETF

The first silver exchange-traded fund, iShares Silver Trust (SLV), began trading on April 28, 2006. The Securities and Exchange Commission gave Barclays Global Investors the go-ahead for this long-awaited ETF on April 27, 2006, after 10 months of pending approval. Investors pushed the ETF's price up 7% on its first day of trading. Silver, like the rest of the commodities market, has been on a tear lately, recently reaching a 23-year record high.

IShares Silver Trust is a unit investment trust constructed to track the price of silver owned by the trust. The ETF trades on the American Stock Exchange with each share representing 10 ounces of silver. Investors must pay a 0.50% expense ratio, which is 10 basis points higher than current gold ETFs  streetTRACKS Gold Shares (GLD) and iShares COMEX Gold Trust (IAU). In addition, as with other ETFs, investors will pay trading costs when they buy and sell shares.

Barclays touts the advantages of its new fund, stating that iShares Silver Trust will provide easy access to the previously inaccessible silver market and allow investors to further diversify their portfolios. (Silver prices have low correlations to many other asset classes.) There are some areas of concern, however. For one, the silver market is not as large as the gold market. As a result, strong investor demand for the silver ETF could affect silver prices by putting pressure on available inventories. In addition, the IRS classifies silver as a collectible, so gains on this ETF, even if held for more than a year, will be taxed at a 28% rate, instead of the 15% rate applicable to most other long-term capital gains.

Van Eck Enters the ETF Fray
Van Eck Global, a money-management firm specializing in hard assets, awaits SEC approval for a new exchange-traded fund tracking the Amex Gold Miners Index. The bogy is composed of companies primarily involved in the mining for gold and silver. The proposed ETF, Market Vectors Gold Miners Index Fund, has a 0.55% tentative expense ratio, which already includes a 0.19% fee waiver. That's more expensive than existing gold bullion ETFs streetTRACKS Gold Shares and iShares COMEX Gold Trust, which charge only 0.40%. Due to high capital expenditures, funds that invest primarily in mining companies tend to be extremely volatile--more volatile even than those that invest in the commodities themselves. For unsuspecting investors, this ETF is a potentially dangerous investment tool.

Janus Jettisons Adviser-Sold Foreign-Stock Fund
Janus Adviser Foreign Stock Fund's  board of trustees agreed on April 18, 2006 to liquidate and terminate the fund on or around July 21, 2006. As of April 28, the fund stopped accepting new money from potential or existing investors. The fund, managed by Jason Yee since its 2002 inception, has trailed the foreign large-blend category average every year except 2004.

Citizens' Changes
McLean Budden, subadvisor for  Citizens Global Equity  since August 2005, has been replaced by Jonathan White, Citizens' CIO and portfolio manager for  Citizens Core Growth  and  Citizens Small Cap Core Growth . Robert Magan, manager on Citizens Balanced  since August 2005, will split Jonathan White's managerial duties on Core Growth. In addition, Citizens 300 Index , a large-growth fund with only $5 million in assets, will close to new purchases on May 9, 2006, and liquidate on June 12. CEO Sophia Collier has managed this fund since its 2003 inception. The management changes mean that, once Citizens 300 closes, ex-Banknorth personnel will run five of Citizens' six equity funds. (Sophia Collier is comanager on Small Cap Core, one of the five.)

Westwood Management to Offer New Large-Value Fund
Westwood Management will soon launch WHG Large-Cap Value, a new equity fund that will invest 80% of its net assets in companies with market caps over $3 billion. The fund is the third offering launched by Westwood this year under the WHG brand. The firm also subadvises the no-load  Westwood Equity (WESWX) and  Westwood Balanced (WEBAX), distributed by Mario Gabelli-run  GAMCO Investors (GBL). This prospective institutional fund will levy a 0.75% expense ratio and require a minimum initial investment of $100,000.

Heartland Promotes Founder's Son
Will Nasgovitz, son of Heartland president and founder Bill Nasgovitz, will join David Fondrie, Ted Baszler, and Hugh Denison as a portfolio manager on  Heartland Select Value . The younger Nasgovitz has worked as a research analyst and research assistant for Heartland since 2003. In addition, Bradford Evans, a portfolio manager on  Heartland Value (HRTVX), will join Heartland Value Plus' (HRVIX) management team, allowing Bill Nasgovitz to focus solely on the Value fund.

Legg Mason Renames Citigroup Asset Management
Legg Mason recently renamed Citigroup Asset Management as ClearBridge Advisors. Brian Posner, CEO of ClearBridge, states, "The establishment of ClearBridge Advisors is another important step in the process of organizing the businesses acquired from Citigroup and integrating them within the framework of Legg Mason's family of investment managers." Legg Mason acquired the former Citigroup on Dec. 1, 2005. ClearBridge has more than $100 billion in assets under management.

New Ave Maria Fund
Schwartz Investment Council announced the May 1, 2006, launch of Ave Maria Small Cap Fund, the fifth in the Ave Maria Mutual Fund Series. The launch of the small-cap fund coincides with the fifth anniversary of  Ave Maria Catholic Values Fund (AVEMX), the first fund in the series. Other Ave Maria funds include Ave Maria Growth (AVEGX), Ave Maria Bond (AVEFX), and Ave Maria Rising Dividend (AVEDX). Like all funds in the Ave Maria Series, the new offering will invest only in companies that do not violate the teachings of the Catholic Church. The fund has voluntarily capped its expense ratio at 1.25%.

Disclosure: Morningstar licenses its indexes to certain ETF providers, including Barclays Global Investors (BGI) and First Trust, for use in exchange-traded funds. These ETFs are not sponsored, issued, or sold by Morningstar. Morningstar does not make any representation regarding the advisability of investing in ETFs that are based on Morningstar indexes.