Daily ETF Watch: ‘Yieldco’ Funds Planned

April 07, 2015

Global X, the purveyor of the income-focused SuperDividend ETF family, is breaking new ground in another pocket of the high-yield space with what it is calling “yieldco ETFs.”

 

New York-based Global X said in a regulatory filing this week that its “yieldcos” will be publicly listed individual securities that are spun off from a parent company. It said in the filing that a yieldco’s operations tend to represent the parent company’s reliable cash flows from established businesses, separate from more speculative and higher-risk areas of operation. The assets owned by a yieldco tend to be in the area of renewable energy infrastructure, especially wind and solar energy.

 

Income-hungry investors may find yieldcos alluring, because, like MLPs and REITs, they pay high dividends. The funds’ prospectus describes yieldcos as “dividend growth-oriented,” and notes that the funds will invest in existing yieldcos as well as companies that are planning to spin off a yieldco via an initial public offering.

 

The three funds described in the filing include:

  • Global X Yieldco Index ETF
  • Global X US Yieldco Index ETF
  • Global X International Yieldco ETF

 

It’s not clear from the initial prospectus what the precise differences between the funds are. The U.S. fund will invest in securities that are listed on a U.S. exchange or domiciled in the U.S.; in contrast, the other two funds both include “ADR/GDR Risk” and “Foreign Security Risk” among their principal risks.

 

Presumably the Global X Yieldco Index ETF will invest in the U.S. and in foreign countries, while the Global X International Yieldco ETF will invest in non-U.S. securities only.

 

The filing did not provide expense ratios, tickers or listing exchanges.

 

 

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