New Bond Funds for Building Ladder Portfolios
ETF news highlights, and the best- and worst-performing ETFs last week.
On Monday last week, Claymore launched a family of seven investment-grade corporate bond ETFs, each of which will mature on a specific year from 2011 to 2017.
Claymore BulletShares 2011 Corporate Bond ETF (BSCB)
Claymore BulletShares 2012 Corporate Bond ETF (BSCC)
Claymore BulletShares 2013 Corporate Bond ETF (BSCD)
Claymore BulletShares 2014 Corporate Bond ETF (BSCE)
Claymore BulletShares 2015 Corporate Bond ETF (BSCF)
Claymore BulletShares 2016 Corporate Bond ETF (BSCG)
Claymore BulletShares 2017 Corporate Bond ETF (BSCH)
These funds are suitable for investors looking to hold a diversified portfolio of debt securities with a targeted maturity date, which is when the fund will close and pay out its net asset value to shareholders. These funds can serve as a diversified, more liquid, and less risky replacement to holding an individual bond and can also serve as a building block for a customized laddered bond portfolio to meet specific cash-flow needs. The annual expense ratio for these funds is 0.24%.
The funds will pay out monthly distributions, and these payments will be taxed as ordinary income. In each fund's last year of operation, as holdings mature, proceeds will be invested in cash and cash equivalents, including U.S. Treasury bills and investment-grade commercial paper. During this transitional final year, monthly distributions are expected to fall. On or about Dec. 31, each fund will make a cash distribution to then-current shareholders of its net assets. Upon maturity, investors will incur capital gains or losses relative to their initial investment and will be taxed accordingly.
Just like corporate bonds, these funds are subject to credit risk and interest-rate risk. However, the diversified nature of these funds can help mitigate individual issuer-specific risks.
Claymore Shipping Index ETF (SEA), which provides exposure to U.S-listed and foreign-listed dry-bulk and tanker shippers, relaunched on Friday. This fund was forced to shutdown in April due to insufficient shareholder participation for the approval of a new investment advisory agreement, not due to lack of investor interest. Like the shuttered fund, the relisted SEA fund will track the Delta Global Shipping Index and will charge a 0.65% annual expense ratio.
Last week, Van Eck reduced the expense ratio on three of its ETFs-- Market Vectors Brazil Small-Cap ETF (BRF) (by 6 basis points to 0.65%), Market Vectors Poland ETF (PLND) (by 11 basis points to 0.65%), and Market Vectors Vietnam ETF (VNM) (by 21 basis points to 0.76%). Of these three funds, only the Poland fund has a direct competitor, iShares MSCI Poland Investable Market Index (EPOL), which was launched about three weeks ago, and charges an expense ratio of 0.65%. There is another Brazil ETF, iShares MSCI Brazil Index (EWZ), but this is more of a large-cap fund. EWZ's expense ratio is 0.65%. While single-country funds allow investors to get targeted exposure to a specific market, we remind investors that many country funds can have very heavy weightings in individual stocks (some funds have individual holdings which can account for more than 20% of the portfolio) or sectors.
Russell Investments commenced its annual reconstitution process for its indexes on Friday, which includes announcing a preliminary list of additions and deletions for some of its indexes. On June 28, it will announce official new membership lists for the Russell Global Index, Russell 3000, Russell Microcap, large-cap Russell 1000 Index, small-cap Russell 2000 Index, and Russell Midcap Index. The new indexes will take effect at market close on June 28 and remain in place for the next 12-month period.
Highlights from Morningstar.com
In his article ETFs and Pairs Trading, Michael Rawson explains the mechanics of these types of trades.
ETF Performance Last Week
Best Performing: Oil services-related ETFs iShares Dow Jones U.S. Equipment Index (IEZ), PowerShares Dynamic Oil & Gas Services (PXJ) and SPDR S&P Oil & Gas Equipment & Services (XES) all climbed over 6% on Thursday after Street analysts said they think valuations for the group are attractive at this time. The group was further supported by a 12% rally in BP plc (BP) on Thursday.Category 1-Wk NAV Return YTD NAV Return 3-Mo Avg Daily Vol (k) iPath DJ-UBS SugarTRSbIdx (SGG) Com-Ag 9.4 -43.2 97.6 iPath DJ-UBS CottonTRSbIdx (BAL) Com-Ag 4.8 4.4 5.3 iPath DJ-UBS SoftsTRSbIdx (JJS) Com-Ag 4.4 -15.55 2.8 iPath S&P 500 VIX ST Futu (VXX) Alt-Volatility 4.1 -12.1 22,002.7 iShares DJ US Oil Equip (IEZ) Energy 3.4 -7.65 309.7 Global X Silver Miners (SIL) Materials 2.9 na 268.8 PowerShares Dyn Oil&GasServ (PXJ) Energy 2.8 -10.02 95.5 SPDR S&P Oil&Gas Equip&Serv (XES) Energy 2.7 -5.78 281.1 iPath S&P 500 VIX M-T Fut (VXZ) Alt-Volatility 2.6 17.54 477.7 iPath DJ-UBS Lead TRSbIdx (LD) Com-Ind Met 2.5 -32.53 2.1 Data thru 6/10.
Worst Performing: Semiconductor ETFs were much weaker earlier in the week because of concerns about the outlook for the second half of 2010 on a weakened euro and slowing momentum in the recent recovery in tech spending. However, the group started to recover in the latter half of the week on positive economic data. Other areas of underperformance include ETFs that cover the more volatile areas of the small caps--micro-cap and small-cap tech.Category 1-Wk NAV Return YTD NAV Return 3-Mo Avg Daily Vol (k) Rydex S&P SC 600 Pure Val (RZV) Small Cap -7.2 5.1 180.7 PowerShares Lux Nanotech (PXN) Technology -6.9 -16.9 21.5 Claymore/AlphaShChinaTch (CQQQ) China -6.5 -9.2 26.2 SPDR S&P Semiconductor (XSD) Technology -6.3 -8.2 298.6 PowerShares Zacks MicroCap (PZI) Small Cap -6.2 -1.8 36.8 PowerShares Dynamic Semicond (PSI) Technology -6.2 -7.3 26.9 iPath DJ-UBS Tin TR Sub-Idx (JJT) Cmdy-Ind Metals -5.9 -2.7 7.1 PowerShares S&P SC Info Tech (XLKS) Technology -5.8 na 4.2 iShares S&P NAmTech-Semicond (IGW) Technology -5.7 -7.8 190.8 iShares Russell Microcap (IWC) Small Cap -5.4 4.1 285.7 Data thru 6/10.
|Let our new newsletter, Morningstar ETFInvestor, help you navigate the exciting and new world of exchange-traded funds. Each issue includes recommendations for commonsense ETF investing,||ETF spotlights, and critical data on 150 top ETFs. This one-year subscription consists of 12 monthly issues. |
|$185.00 for 12 Print Issues||$175 for 12 PDF Issues|
Patricia Oey does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.