The latest innovation in the rapidly-growing fixed income ETF space was rolled out on Friday, as Claymore introduced a line of seven ETFs, each of which focuses on corporate bonds with maturity dates falling in a specific year. The new ETFs are:
- BulletShares 2011 Corporate Bond ETF (BSCB)
- BulletShares 2012 Corporate Bond ETF (BSCC)
- BulletShares 2013 Corporate Bond ETF (BSCD)
- BulletShares 2014 Corporate Bond ETF (BSCE)
- BulletShares 2015 Corporate Bond ETF (BSCF)
- BulletShares 2016 Corporate Bond ETF (BSCG)
- BulletShares 2017 Corporate Bond ETF (BSCH)
Each of the new ETFs is linked to an index comprised of investment grade corporate bonds with a maturity date in the year included within the fund name. Unlike most fixed income ETFs, the BulletShares products will convert to cash as the relevant year draws to a close, with a distribution made to shareholders upon maturity. So from an investor perspective, the experience will be similar to holding an individual bond to maturity–a scenario that allows increased flexibility in managing interest rate risk–although the ETF structure offers the benefit of instant diversification across a number of issuers.
The name of the new products are a reference to a “bullet” investment strategy, which consists of acquiring different securities maturing around the same target date. The return-of-principal features of these products may make them a valuable tool for liability-driven investors, ranging from individual investors preparing to pay college tuition to billion dollar institutions with a financial obligation on the horizon.
“The Claymore BulletShares Corporate Bond ETF suite enhances investor access to the investment grade corporate bond market,” commented William Belden, Managing Director, Claymore Securities, Inc. “The Funds consist of comprehensive portfolios of corporate bonds with similar effective maturities. When used individually or in combination, the Funds provide investors the opportunity to structure portfolios of corporate bonds based upon their lifestyle-driven investment needs.”
Earlier this year, iShares introduced a suite of target end date municipal bond ETFs, ranging from 2011 (MUAA) to 2017 (MUAF). Claymore had initially filed to extend the product line through 2020, so we could see an addition to the recently-launched suite if the market reception is a warm one. Each of the new ETFs charges an expense ratio of 0.24%, right in line with the average for the Corporate Bonds ETFdb Category.
Besides the first-to-market nature of the new products, the launch of the BulletShares products from Claymore is noteworthy for one additional reason. There are now more than 1,000 exchange-traded products available to U.S. investors, an impressive milestone for an industry that was an afterthought among investors only a few years ago. Oddly enough, it’s the second time the 1,000 ETF marker has been eclipsed; the shuttering of a dozen Rydex leveraged ETFs last month pushed the total back below the mark (see Five Bold Predictions For The ETF Industry).
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Disclosure: No positions at time of writing.