Multi-Asset ETFs vs. Individual ETFs

| About: Guggenheim Multi-Asset (CVY)
This article is now exclusive for PRO subscribers.

The Guggenheim Multi-Asset Income Fund (NYSEARCA:CVY) presents a unique alternative for yield-hungry investors. Specifically, this ETF offers a single basket with U.S. dividend paying stocks, ADRs (dividend stocks of foreign companies U.S. exchanges), master limited partnerships (MLPs), real estate trusts (REITs) as well as preferred shares.

At present, CVY delivers roughly 4.6% annualized and is distributed quarterly. That’s roughly double the annual yield of the Dow Jones Industrials Diamonds Trust (NYSEARCA:DIA).

The Multi-Asset Income Fund (CVY) offers risk that is commensurate with the S&P 500 ... at least in terms of beta. For those who have a difficult time accepting quarterly payments from the SPDR S&P 500 Trust (NYSEARCA:SPY) that are less than 0.45%, quarterly payments of 1.15% may be the ticket.

Still, I couldn’t help but wonder ... what if one purchases asset components separately. How would one fare with a multi-asset ETF vs. a portfolio of individual yield producers?

Guggenheim’s web site suggests that the different assets covered by CVY break down (roughly) as follows:

U.S. Stocks 50%
ADRs 10%
REITs 10%
CEFs 10%
MLPs 10%
Preferreds 10%

I compared CVY’s percentage gains over the last six months and 12 months to a weight-adjusted composite of “similar” ETFs. Here are the results:

Multi-Asset ETF Versus Component ETFs
6 Month % 12 Mo %
iShares DJ Select Dividend Fund (NYSEARCA:DVY) 15.8% 23.9%
BLDRs Developed Market ADRs (NASDAQ:ADRD) 10.2% 26.3%
Vanguard REIT ETF (NYSEARCA:VNQ) 19.9% 28.9%
Powershares CEF Composite (NYSEARCA:PCEF) 8.1% 18.1%
JP Morgan Alerian MLP (NYSEARCA:AMJ) 4.0% 32.7%
iShares S&P Preferred (NYSEARCA:PFF) 5.5% 20.2%
Weight-Adjusted Return 12.7% 24.6%
Guggenheim Multi-Asset Income (CVY) 14.9% 28.1%

In this down-and-dirty effort to evaluate the Multi-Asset ETF (CVY), the pre-bundled diversifier outlasted a weighted composite of “similar” ETFs. Granted, my write-up hardly stands up to the rigors of scientific scrutiny. Nevertheless, ETF advocates should be encouraged to learn that CVY may be a useful method for increasing income production while incorporating stock and non-stock assets in a single package.

With that said, I’m not particularly crazy about Guggenheim’s expense “story.” At the moment, there’s a ”cap” on internal expenses at 0.60% through the end of 2013. Then it could be revised to 0.98%. And that’s not all. Guggenheim maintains that some expenses fall outside the “cap,” resulting in an actual expense ratio of 0.84%.

Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.