Claymore is offering investors access to a market segment that they may not have been able to access before with Friday's launch of the Claymore/Clear Global Timber exchange-traded fund (NYSEARCA:CUT).
The fund is the first U.S.-listed timber fund, and it opens up a whole new asset class to retail investors. Previously, only institutional investors were able to invest in timber due to the associated costs. It is a desirable investment area because of its low correlation with the broader market.
CUT tracks the Clear Global Timber Index, which includes companies that own or manage forested land and harvest the timber from it for the commercial use and sale of wood-based products such as lumber, pulp and paper products. Components must have market capitalizations of at least $300 million, and companies that do not own or manage forested land and harvest trees are excluded from the index. Individual component weights are capped at 4.5% of the index.
As of September 30, the index has 27 components from 11 countries; its top components include International Paper, Stora-Enso Oyj, Weyerhauser Corp. and MeadWestVaco Corp. The United States represents more than one-fifth of the index at 26.39%, followed by Canada at 12.25%, Japan at 11.50%, Finland at 9.00% and Brazil at 9.00%. It has a PE ratio of 14.3.
The Clear Global Timber Index has outperformed the Dow Jones World Forestry and Paper Products Index in each of the past five calendar years and is up 16.38% year-to-date through September 30, versus a 6.88% increase for the other index.
CUT has an expense ratio of 0.65%. You can read the prospectus here.
Written by Heather Bell