A New Closed End Fund ETF Comes To Market

Includes: PCEF, YYY
by: Benzinga

By: The ETF Professor

It has been a trying week for U.S. stocks, but ETF sponsors have still pushed some new product to market. Income investors will get another ETF to consider today when the YieldShares High Income ETF (NYSEARCA:YYY) debuts.

The fund comes courtesy of new ETF sponsor YieldShares, which is managed by Christian Magoon. YYY is taking the place of the Sustainable North American Oil Sands ETF (SNDS). Current shareholders in SNDS will get one share of YYY for each SNDS share they hold.

Magoon's new ETF has the potential to be a dividend investor's delight. Closed end funds are prized by income investors for the asset class's robust yields and YYY has the potential to oblige even the most discerning yield hunters with an indicated index yield of 10.18 percent, according to data provided to Benzinga by Magoon.

YYY has an established competitor in the form of the PowerShares CEF Income Composite Portfolio (NYSEARCA:PCEF), which has $475.7 million in assets under management. PCEF has a distribution yield of just over eight percent and an annual expense ratio of 1.73 percent, according to PowerShares data. YYY has total management fees of 1.65 percent.

The new closed end fund ETF, which tracks the ISE High Income Index, only includes those CEFs with $500 million or more market cap and $1 million six month average daily trading volume. From there, the ISE index selects 30 highest overall ranked CEFs by ISE based on three criteria: fund yield, discount to net asset value and liquidity.

YYY will use a unique linear-weighting strategy, meaning highest ranked CEF would have 30 times the weight of the 30th ranked CEF in the index. No CEF can exceed 4.25 percent of the ETF's weight at the time of reconstitution.

As of Thursday, 59 percent of the index was invested in equity CEFs with 26 percent in debt CEFs. The average discount to NAV was just over seven percent with an overall index duration of 1.38 years. The top four issuers in the index were Eaton Vance, BlackRock, Nuveen and PIMCO.

Disclaimer: Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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