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Rating:ETF Roundup: Puerto Rico ETF Is Aimed at Email Routing List Email & Route  Print Print
Tuesday, August 27, 2013

ETF Roundup: Puerto Rico ETF Is Aimed at "Yield Hogs"

News summary by MFWire's editors

A Caribbean ETF

Barron's Randall Forsyth picked apart Van Eck's [profile] proposed Puerto Rico municipal-bond ETF, saying the investment is designed to lure "yield hogs," people who seek the highest returns without considering returns.

The appeal of the ETF is wrapped up in the fact that it is exempt from federal as well as most state and local income taxes, not to mention that Puerto Rico offers some of the highest returns in the muni bond market, Forsyth explains.

Forsyth notes that even though the Commonwealth is still rated on the lowest rung of investment-grade, technically leaving them in the category, the market's assessment is that they're more like junk bonds, making them more risky than they're perceived.

NYSE Drops ETFs from Trading Plan

Index Universe's Olly Ludwig writes that the New York Stock Exchange has pulled 530 ETFs from a new trading system. The limit-up/limit-down trading system, is designed to keep bid/ask spreads on lightly traded ETFs and ETNs tight, Ludwig writes.

Ludwig said the exchange stated that the program would have to be fine-tuned after dozens of ETFs were being halted from their first day that lightly traded securities were integrated into the program. The system would stop trading before the damage is done and investors would be protected as wide trading spreads can reduce investment returns, Ludwig reports.

The system would work by not allowing trades to take place more than a certain percentage cap, 10 percent on low-volatility days or under 10 percent on high-volatility days, over the preceding five-minute period, Ludwig explains.

A New EM Debt Fund That is Short Duration, and Dollar-Denominated

Invesco [profile] ProShares filed for a short-dated bond fund targeting dollar-denominated emerging markets credits, the Short Term USD Emerging Markets Bond ETF, IndexUniverse's Olly Ludwig writes. Ludwig writes that the credits come from issuers that range from governments to independent corporations and is designed as yet another ETF that helps to address interest-rate risk.

The ETF would own fixed-income securities with maturities ranging from 18 months to no more than five years and was created to give access to more liquid pockets of the emerging markets fixed-income universe, Ludwig writes.

To read more, click here, here and here

Edited by: Casey Quinlan

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