AROUND THE WORLD OF ETFs

August 23, 2011

 

Barclays Redeems VZZ Due To Price Drop

Barclays Bank automatically redeemed its iPath Long Enhanced S&P 500 Mid-Term Futures ETN (NYSE Arca: VZZ) on July 1 because the price of the notes fell just below the $10 per share redemption barrier.

VZZ, which had $12.8 million in assets as of June 30, was halted by Arca, the New York Stock Exchange’s electronic trading platform, after the ETN fell to $9.98 a share. That was $1.82 lower on the day.

VZZ’s 15 percent slide could have been related to the looming possibility of the automatic redemption, as its nonleveraged counterpart—the iPath S&P 500 VIX Mid-Term Futures ETN (NYSE Arca: VXZ)—was down just about 4 percent at the time Arca halted trade in VZZ.

First Trust Debuts Cloud Computing ETF

First Trust rolled out in July the First Trust ISE Cloud Computing Index Fund (Nasdaq GM: SKYY). The ETF is based on the ISE Cloud Computing Index and includes companies actively involved in the cloud computing industry, according to a filing the company made with the SEC on April 20.

Cloud computing refers to computer users accessing many different servers to meet their needs, as opposed to using centralized computing resources. Companies such as Amazon with immense computing resources that go beyond internal demands have become big players in the expanding world of cloud computing.

SKYY comes with an annual expense ratio of 0.60 percent.

Pimco Launches Short-Dated Corp. Junk ETF

On June 17, Pimco rolled out a high-yield corporate bond index ETF focused on the short end of the yield curve. The Pimco 0-5 Year High Yield Corporate Bond Index Fund (NYSE Arca: HYS) tracks the BofA Merrill Lynch 0-5 Year US High Yield Constrained Index and costs 0.55 percent after a fee waiver, the company said on its website.

Noninvestment-grade debt offers a way to obtain extra yield at a time when benchmark short-term interest rates remain near zero. The noninvestment-grade debt in the new Pimco fund must be dollar denominated and issued in the U.S. It must have fewer than five years’ remaining term to final maturity, a fixed coupon schedule and a minimum amount outstanding of $100 million, issued publicly, the company said. Also, allocations to an individual issuer will not exceed 2 percent.

Emerging Global Unveils Sector ETFs

Emerging Global Advisors launched a first-of-its-kind suite of sector funds on June 23, canvassing the developing markets that are tied to the Dow Jones Emerging Market Titans Index series. The new funds are marketed as the Global Emerging Market Sector ETFs, or “GEMS.” The family is the first to represent a complete lineup of sector ETFs drawing their components entirely from emerging markets. The ETFs, which all have net expense ratios of 0.85 percent, are:

  • EGShares Basic Materials GEMS ETF (NYSE Arca: LGEM)
  • EGShares Consumer Goods GEMS ETF (NYSE Arca: GGEM)
  • EGShares Health Care GEMS ETF (NYSE Arca: HGEM)
  • EGShares Industrials GEMS ETF (NYSE Arca: IGEM)
  • EGShares Technology GEMS ETF (NYSE Arca: QGEM)
  • EGShares Telecom GEMS ETF (NYSE Arca: TGEM)
  • EGShares Utilities GEMS ETF (NYSE Arca: UGEM)
  • EGShares Consumer Services GEMS ETF (NYSE Arca: VGEM)


IndexIQ Rolls Out Small-Cap REIT ETF

In June, IndexIQ launched a small-cap ETF focused on REITs, providing investors with what the company called an opportunity to earn higher dividends than on REIT ETFs focused on bigger firms.

The IQ US Real Estate Small Cap Index ETF (NYSE Arca: ROOF) comes with a 0.69 percent annual expense ratio, and is based on the IQ US Real Estate Small Cap Index—a float-adjusted, market-cap-weighted benchmark focused squarely on small-capitalization

U.S. real estate companies.

IndexIQ said ROOF’s dividend of about 5 percent is as much as 200 basis points higher than those on many large-cap ETFs.

The index that ROOF is built on includes the bottom 10 percent of U.S. REITs by market capitalization. IndexIQ also said that small-cap REITs have significantly outperformed large-cap REITs over most time frames.

 

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