We were pleased (and a bit embarrassed) to recently discover the Guggenheim Spin-Off ETF(CSD). The index, which tracks the Beacon Spin-Off Index, owns 40 stocks, with more than half of its assets in 10 stocks. The index is rebalanced yearly, though rebalances may be postponed if there are insufficient assets. Companies eligible for inclusion are companies that were either spun off or carved out between 6 and 30 months prior to the rebalancing. We believe that this misses opportunities which often come at or soon after distribution. The fund’s performance has been nothing particularly impressive, with an average annual return of 0.05% since inception on 12/15/2006. We’ve always felt that the best approach to spin offs is to pick those that represent good value. We see nothing in the performance or makeup of this ETF to make us change our opinion.
Disclosure: The author hold no position in any security mentioned
The ETF also doesn’t look at the parent companies. I think a bigger problem is that the ETF tracks the Beacon Spin-Off Index which hasn’t been updated since June 2010! Look at some of the companies it owns! http://www.beaconindexes.com/INDX.aspx?INDX=CLRSO&sub=3
Obviously missing out on quite a few opportunities and hanging onto some real duds. I am not quite sure what has happened to Beacon, but it doesn’t appear to be a reliable source for tracking spins anymore. All of the news on the site is outdated as well. Perhaps the company ran into issues during the crisis and hasn’t recovered the asset base. Beacon was sold to Provident Bank in August ’11, but it appears that didn’t have any affect on the spinoff index at all.
Too bad as it would be a nice, easy source for people to check out for completed spins.
This really hits at the darker side of the ETF industry. As the industry exploded into many more niche areas there are so many ‘walking dead’ ETF’s out there that are dying for new capital. The WSJ had a recent article about this (http://online.wsj.com/article/SB10001424052970203686204577112851171154654.html)
Might be better off taking this discussion to our never used discussion board.
Not sure what I’m missing here. It seems to be absolutely thrashing the S&P 500 and the holdings of the fund look updated to me.