Claymore Securities, the Lisle, Ill.-based money management firm
known for its niche investment strategies, was forced to close its
shipping-industry ETF because a shareholder vote on a proposed
change in the fund's investment advisory agreement didn't attract
enough voters to establish a quorum.
The company, acknowledging that this may be the first time in
the history of ETFs that a fund has closed for this reason, said
all its other ETFs and closed-end funds reached quorums within the
allowable period and successfully approved new investment advisory
agreements. The votes were related to Claymore's acquisition by
Guggenheim Partners in October, the company said in a press
The company said 91 percent of those who voted approved the new
advisory agreement for the Claymore/Delta Global Shipping Index
(NYSEArca:SEA), and while the lack of a 50 percent quorum forced
the closing, it's already filed with regulators to launch a
successor product that will track the same index and trade with the
same symbol, "SEA." The fund had gathered $152.5 million in
"The Fund's significant non‐U.S. shareholder presence plus the
large number of shares held anonymously made it difficult to
solicit shareholder consent," Claymore Managing Director William
Belden said in the prepared statement.
An ETF First
Claymore needed at least half of "SEA's" shareholders to achieve
the quorum, but only gathered between 5 and 10 percent to vote on
the measure, Belden said in a telephone interview.
"For ETFs, to my knowledge, this has never occurred," Belden
said in the interview.
He added that the process of proxy solicitation can be
difficult. He noted, for example, that iShares experienced some
challenges when it went through a similar change in advisory
agreements with its ETFs following BlackRock's purchase of the
iShares franchise from Barclays Global Investors. But he stressed
that in each case, BlackRock reached the 50 percent threshold.
He said the fact that many investors used "SEA" as part of
shorter-term, sector rotation strategies may have made the
vote-solicitation process more difficult to the extent that some
shareholders didn't own the fund anymore by the time Claymore
reached out to them.
The fund's last day of trading was April 27, and all
shareholders remaining on April 28 will receive a cash payout
following liquidation of the underlying securities. That
distribution will include any capital gains and dividends, the
company said. The fund lost about 3 percent on its last trading
day, settling at $15.87 per share.
"Claymore believes there is significant interest in the
marketplace for a shipping ETF and that investors are seeking
exposure to the shipping industry," Belden said in the
He said Claymore filed with the Securities and Exchange
Commission on April 27 to register the new "SEA" ETF, but declined
to say when the fund might be rolled out.
"The SEC is working with us to make this process take as little
time as possible."
While Claymore has made clear that it intends to preserve its
reputation as a purveyor of niche ETF strategies, the Guggenheim
acquisition is sending the company in new strategic directions.
Last month, it rolled out a number of broad-based funds that
indicate how the presence of Guggenheim will change Claymore.
The broadest of the new ETFs is the Wilshire 5000 Total Market
Index ETF (NYSEArca:WFVK). It competes with similar offerings from
firms including State Street Global Advisors, Vanguard and
SSgA's fund, the SPDR Dow Jones Total Market ETF (NYSEArca:TMW),
is the closest competing fund to Claymore's Wilshire 5000 ETF.
Until about a year ago, TMW was based on the same Wilshire index as
WFVK, and even today tracks a very similar benchmark. Claymore's
new product beats TMW on fees, charging 0.12 percent in annual
expenses compared with 0.20 percent for TMW.
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