Van Eck’s Market Vectors arm has filed paperwork to market a global spin-off ETF. There’s already a fund targeting U.S. spin-offs, but none that focuses on companies based on markets outside of the U.S.
The Market Vectors Global Spin-Off ETF (SPUN) covers spun-off companies that are headquartered and listed in the U.S. or developed markets in Western Europe and in Asia. The index methodology further requires that at least 80 percent of the stock’s outstanding shares have been distributed to the parent company’s shareholders without any action needed on their part, according to the prospectus. It noted that at the end of 2014 the index comprised 83 securities ranging in size from $235 million to $104 billion in market capitalization, though companies must have a market cap of at least $500 million to be considered for inclusion.
Guggenheim’s Spin-Off ETF (CSD | C-41) is well-established, with more than $500 million in assets under management. It launched in 2006, and can hold some pretty small stocks. Still its components’ weighted average market cap, at $10.49 billion, is approximately twice the same metric noted in SPUN’s prospectus.
CSD’s main drawback appears to be the significant concentration in larger stocks, with its top 10 holdings representing more than 45% of the portfolio. However, SPUN seeks to avoid this problem by relying on an equal-weighted index, meaning the smallest stock will have the same influence as the largest and price will be the primary driver of the fund’s movements rather than size.
In addition to the ticker “SPUN,” the prospectus noted the fund will launch on the NYSE Arca exchange. However, the filing did not include an expense ratio.