Top ETF Story This Week: Bear's New Active Bond Fund

By Jim Wiandt

The intrigue around the launch of the Bear Stearns Current Yield fund (YYY) has certainly be interesting to follow.

Murray Coleman has been in the YYY story this week, and I believe is working on a more detailed feature looking at Bear Stearns (BSC) ETF offerings and the implications of the swallowing of Bear by JP Morgan (JPM), which does ETF servicing. For those of us who follow the exchange-traded product pipeline, the on-and-off nature of the possible launch, coupled with fact that Bear Stearns was being sold off in a government-mandated fire sale and this was arguably the first true active ETF certainly made all of this extremely interesting for us to follow.

Murray has covered the story well with the initial story covering the launch, and then a follow-up on S&P's decision to announce it had given the fund its very highest credit rating. Now that was interesting. I believe later the same day or early the next day after the main launch press releases were sent out sort of quietly announcing the launch, S&P came out with a press release of its own announcing that it had given YYY it's AAAf rating (the highest rating it can give to a fund - the f designates funds w/ variable net asset values).

Further on the ETF story, it's interesting that Murray is handicapping PowerShares as possibly on track to have the first REALLY active fund trading (a straight active equity ETF with extremely limited intraday transparency). The one things ebb and flow, people are being cautious, but we know a wave of active funds will soon hit the market, and it looks at the moment like PowerShares is out in front.

This is the very first time I've ever gotten an email from S&P talking about the rating for an ETF, and it seemed possibly larger than the actual announcement...not just an assurance that the fund was a safe investment, but also a broader assurance that the all is well with US financial systems. Maybe W rang up the S&P rating folks and said, "hey guys let's get on this one" Anyway, it was very curious. Also very curious is the union of blue blood JP Morgan with renegade Bear Stearns, who we've always all been aware was a bit of a loose cannon. And then, just like that, it was gone. Wow.

So that has all been riveting for us. A BIG story in the ETF business with ripples of implications out into the wider world...

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Comments

[Indexor]

Jim Wiandt - Excellent post and of course now I'm wondering what's truly going on? As much as I'm a huge believer in ETFs and am open to learning about anything new, I will not use YYY. I started looking for YYY after you first mentioned that it was on the drawing boards, probably over a year ago. But as it dragged on and iShares introduced SHV, it came off my radar screen.

I had to do a doubletake after CNBC made a big joke on YYY's supposed introduction date as the first "active" ETF and announced it had obviously been shelved due to Bear's problems. Next thing I learn is that YYY actually came to market, more quietly than any ETF introduction I have ever seen. Especially in light of the race for the first "active" ETF.

These are certainly interesting times in our financial markets around the world. For the moment, cash seems to be king. But not in YYY.