WisdomTree filed regulatory paperwork that would bring to market
an S&P 500 managed-distribution fund, offering simultaneous
exposure to the ETF market's three popular S&P 500 funds with
the added allure of a 6 percent annual yield.
The prospectus didn't immediately make clear how a fund that
principally owns three
with yields of between 1.95 and 2.10 percent-the SPDR S&P 500
ETF (NYSEArca:SPY), the iShares Core S&P 500 ETF (NYSEArca:IVV)
and the Vanguard S&P 500 ETF (NYSEArca:VOO)-will triple that
return to reach the distribution rate of 6 percent.
Companies don't comment on registration statements until they
become 'effective' as a matter of course, but according to the
prospectus, "the fund's actual annual distribution rate could be
higher or lower than the targeted annual distribution based on
market factors occurring during the year."
The search for yield in the current market, with the Fed's
constant downward pressure on borrowing rates since the crash of
2008-2009, has turned the search for yield into a very creative
endeavor. And, this WisdomTree filing is perhaps one of the most
peculiar strategies to rear its head.
The fund, which WisdomTree hasn't yet tagged a ticker or price
to, will be a "fund of funds," equally weighting the three ETFs
that make up its underlying index, the S&P 500 Managed
Distribution Index. However, between quarterly rebalancing, the
fund may veer off that equally weighted strategy by investing in
shares of the underlying ETFs or the securities that make up the
portfolios of those individual ETFs.
Holding shares of ETFs or the securities within those funds may
be one way this fund makes up the yield gap. The prospectus also
mentioned that the fund may invest in derivative instruments,
perhaps another avenue through which the fund may ramp up
Permalink | 'copy; Copyright 2009 IndexUniverse LLC. All rights
Don't forget to check IndexUniverse.com's ETF Data
2013 IndexUniverse LLC
. All Rights Reserved.