The Sustainable North American Oil Sands ETF (NYSEArca:SNDS) is
about to be discontinued and turned into a completely new strategy
that focuses on high income due to the fund's struggle to gather
assets in the 10 months it's been in the market.
The $1.2 million SNDS will become the YieldShares High Income
ETF (NYSEArca:YYY), a fund of funds that will track the ISE High
Income Index and invest in the top 30 U.S. exchange-listed
These funds are selected and ranked based on factors that look
to create a portfolio designed to deliver high current income,
according to a filing Exchange Traded Concepts-the firm behind
SNDS-submitted to regulators. YYY will cost 1.65 percent a year,
which includes a 0.50 percent management fee.
It's not unusual to have an ETF provider retrofit a strategy
that's no longer economically viable in this manner, because it's
often more economical to transition the fund into a brand-new
strategy than liquidate a fund and start from scratch.
Of note, Exchange Traded Concepts' latest ETF will use the same
ticker the now-defunct Bear Stearns Active ETF was known for:'YYY."
The original 'YYY' used to be listed on the American Stock Exchange
and it was liquidated in October 2008.
YYY can invest in a variety of funds that own securities
including equities, taxable investment-grade bonds, high-yield
debt, municipal securities, preferreds, convertibles, commodities
and REITs, among others, the filing said.
Eligible holdings, picked from the entire universe of
U.S.-listed closed-end funds, must have at least $500 million in
market capitalization and meet minimum trading volume
The funds are then ranked based on factors thusly:in descending
order by fund yield; in ascending order by fund share price
premium/discount to net asset value on the index rebalancing date;
and in descending order by fund average daily value of shares
traded over the six-month period prior to the index rebalancing
date, the filing said.
Once ranked, the top 30 underlying funds are included in the
index, and are weighted based on what the company calls a "modified
linear weighted methodology."
That essentially means the weighting scheme begins by assigning
the top-ranked security the greatest weighting in the portfolio
that equates to the multiple of the smallest weighting-in a
portfolio of 30 names, the top-weighted holding's weight will be 30
times that of the smallest.
Still, weightings are "modified" in that each constituent
weighting is capped at 4.25 percent of the overall mix regardless
of this linear scheme, the filing said.
The index, created in partnership with YieldShares, calculated
by Structured Solutions, and provided by the International
Securities Exchange, is rebalanced annually.
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