Claymore Plans Target Maturity Date Junk Bond ETFs

Includes: HYG, JNK, PHB
by: Michael Johnston

Claymore, the Chicagoland-based ETF issuer apparently in the midst of reshaping its product lineup, now has plans to roll out a suite of target maturity date high yield corporate bond funds. According to a recent SEC filing, Claymore is seeking approval on nine funds with maturity dates beginning in 2012 and stretching through 2020. The proposed ETFs include:

  • Claymore BulletShares 2012 High Yield Corporate Bond ETF
  • Claymore BulletShares 2013 High Yield Corporate Bond ETF
  • Claymore BulletShares 2014 High Yield Corporate Bond ETF
  • Claymore BulletShares 2015 High Yield Corporate Bond ETF
  • Claymore BulletShares 2016 High Yield Corporate Bond ETF
  • Claymore BulletShares 2017 High Yield Corporate Bond ETF
  • Claymore BulletShares 2018 High Yield Corporate Bond ETF
  • Claymore BulletShares 2019 High Yield Corporate Bond ETF
  • Claymore BulletShares 2020 High Yield Corporate Bond ETF

Earlier this year Claymore introduced the first installment in the BulletShares suite of products, launching seven target maturity date corporate bond ETFs. Those funds focused primarily on investment grade debt, whereas the proposed ETFs now in registration would invest in junk bonds. iShares has also rolled out target maturity date bond funds, introducing a line of muni bond ETFs earlier this year.

The junk bond BulletShares products would seek to replicate indexes maintained by Accretive Asset Management that consist of high yield debt securities with effective maturities in the year specified in the fund name. Unlike most fixed income ETFs, BulletShares products maintain a target termination date, generally at the end of the relevant year. As underlying holdings of these funds reach maturity, the assets of BulletShares ETFs will gradually be converted to cash, with an ultimate distribution being made to shareholders at the maturity date. So in that sense, BulletShares behave much like a single fixed income security, something that may be very attractive for liability-based investors.

Junk bonds have become an extremely popular investment in recent months as investors have been forced to accept additional risk in exchange for more attractive yields on fixed income securities. With benchmark interest rates expected to remain near record lows for the foreseeable future, yields on low risk Treasuries and even investment grade corporate debt have been eroded considerably. Currently, there are three funds in the High Yield Bonds ETFdb Category; aggregate inflows into JNK, HYG, and PHB topped $900 million during the month of August.

Reshuffling Continues

The pace at of change at Claymore, which was acquired last year by Guggenheim Partners, seems to be accelerating. The firm recently announced the shuttering of four funds that had been slow to gain traction, along with the conversion of the existing Stealth ETF into a micro-cap fund.

Disclosure: No positions at time of writing.

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