AROUND THE WORLD OF ETFs

December 14, 2009

Guggenheim Completes Claymore Purchase

In mid-October, privately held institutional money manager Guggenheim Partners completed its acquisition of Claymore Group Inc. The deal covers all aspects of Claymore’s operations, including Claymore Securities Inc., Claymore Investments Inc. in Canada and Claymore Advisors, LLC.

The deal was originally announced in July. Claymore is the 13th-largest ETF provider in the United States, with 34 ETFs that have a combined total of $2.2 billion in assets under management.

SSgA Launches VRDO ETF

State Street Global Advisors launched the world’s second variable rate demand obligation ETF, the SPDR S&P VRDO Municipal Bond ETF (NYSE Arca: VRD), on Sept. 24. It tracks the performance of the S&P National AMT-Free Municipal VRDO Index, which holds VRDOs issued by U.S. states, local governments and agencies. The fund charges 0.20 percent in annual expenses.

VRD follows in the footsteps of the PowerShares VRDO Tax-Free Weekly Portfolio (NYSE Arca: PVI), an ETF that launched in November 2007 providing similar exposure to the VRDO market, which has accumulated nearly $1 billion in assets.

VRDOs are municipal bonds that can be “put back” to their issuers at full value on a weekly basis, and tend to hold very little risk.

At its launch, PVI was paying a tax-free 30-day SEC yield of 0.84 percent.

BGI Rolls Out Mega-Cap Funds

Barclays Global Investors added three new mega-cap ETFs to its lineup, with the debut of the iShares Russell Top 200 Index Fund (NYSE Arca: IWL), iShares Russell Top 200 Growth Index Fund (NYSE Arca: IWY) and the iShares Russell Top 200 Value Index Fund (NYSE Arca: IWX). Each charges 0.20 percent in annual expenses.

The Russell Top 200 Index measures the performance of the largest 200 U.S.-listed companies.

New iShares Covers Eastern Europe

The parade of new emerging markets ETFs continued in early October with the launch of the iShares MSCI Emerging Markets Eastern Europe Index Fund (NYSE Arca: ESR).

The fund tracks a free-float-adjusted market capitalization index measuring the equity performance of four countries: At launch, Russia dominated the lineup at 75 percent of the portfolio; followed by Poland, at 13 percent; Czech Republic at 6 percent; and Hungary, at 6 percent. Roughly half of the fund is invested in energy names, with Gazprom and Lukoil as its top two holdings (about one-third of the portfolio).

ESR is the second emerging market Europe ETF to hit the market, following the SPDR S&P Emerging Europe ETF (NYSE Arca: GUR). GUR is also heavily concentrated in Russia, albeit less so than ESR.

The new ETF has an annual expense ratio of 0.72 percent, compared with 0.60 percent for GUR.

BarCap Halts Share Creations For PGM

Barclays announced on Oct. 16 that it would temporarily stop creating more shares of the iPath Dow Jones-UBS Platinum Subindex Total Return ETN (NYSE Arca: PGM), effective immediately. PGM tracks the performance of front-month platinum futures contracts traded on the New York Mercantile Exchange.

At about $100 million in assets, PGM is a relatively small product. However, the platinum futures market is a very thin market, and the New York Mercantile Exchange has tight “accountability” limits in the platinum space, beyond which the exchange can force holders to reduce their positions. Currently that limit is 1,500 net futures positions, almost equal to PGM’s portfolio at the time of the announcement.

PGM was the fifth exchange-traded product to put a freeze on creations. At press time, it was trading at a 22 percent premium.

The Commodity Futures Trading Commission is expected to announce new federal position limits in the commodity futures space later this year.

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