Claymore Securities, more known for its niche ETF strategies, has launched seven target-maturity-date investment-grade corporate bond funds, which allow the average investor a chance to hold an individual bond to maturity.
The new funds, each with an expense ratio of 0.24%, have maturity dates starting at the end of 2011 through the end of 2017, and each fund will close upon maturity, providing investors with the opportunity to redeem the full par value on maturity, writes Olivier Ludwig for IndexUniverse. Traditional bond ETFs don’t have maturity dates, and investors may lose out if they have to draw on principal during a rate-hike cycle.
The new ETFs try to reflect BulletShares Corporate Bond Indexes, which have between 85 to 190 individual bonds, and employ sampling strategies. Fund investors will be able to employ a bond investing strategy called “laddering.” Investors may choose to either spend the money, reinvest it into new rungs on the bond ladder with more distant maturity dates or invest in something else entirely.
The new funds are:
- Claymore BulletShares 2011 Corporate Bond ETF (BSCB)
- Claymore BulletShares 2012 Corporate Bond ETF (BSCC)
- Claymore BulletShares 2013 Corporate Bond ETF (BSCD)
- Claymore BulletShares 2014 Corporate Bond ETF (BSCE)
- Claymore BulletShares 2015 Corporate Bond ETF (BSCF)
- Claymore BulletShares 2016 Corporate Bond ETF (BSCG)
- Claymore BulletShares 2017 Corporate Bond ETF (BSCH)
Once the bonds mature, holdings will be invested into 13-week Treasuries or similar cash equivalents until the end of the calendar at which the ETF matures. It should be noted that there is a risk that bonds within the portfolio may default before maturity.
Claymore Managing Director William Belden has remarked upon plans to expand the product line further into the future.
iShares also offers maturity-date bond funds. Though, the iShares products are focused on municipal bonds, with maturity dates between 2012 and 2017, and they have an expense ratio of 0.30%.
Max Chen contributed to this article.