Claymore Securities has just launched several new investment grade corporate bond ETF products that are designed to allow investors to invest in a basket of bond maturities.  The Claymore BulletShares Corporate Bond ETFs has designated years of maturity which range from 2011 out to 2017.

The investment-grade corporate bond target (minimum “BBB-” per S&P and “Baa3” per Moody’s) have effective maturities in the years respective to each Fund.  The investment philosophy seeks to replicate the BulletSharesTM USD Corporate Bond Indices developed by Accretive Asset Management that should allow investors to build a laddered portfolio of debt maturities in investment grade corporate bonds.

Claymore BulletShares Corporate Bond ETFs	TICKER
Claymore BulletShares 2011 Corporate Bond ETF	BSCB
Claymore BulletShares 2012 Corporate Bond ETF	BSCC
Claymore BulletShares 2013 Corporate Bond ETF	BSCD
Claymore BulletShares 2014 Corporate Bond ETF	BSCE
Claymore BulletShares 2015 Corporate Bond ETF	BSCF
Claymore BulletShares 2016 Corporate Bond ETF	BSCG
Claymore BulletShares 2017 Corporate Bond ETF	BSCH

Ultimately, the goal here is to seek a higher return than corresponding Treasuries, something which has become an issue for bond investors now that even the 10-year Treasury note has flirted with 3.00% again in recent weeks.

The total annual fund operating expenses here are listed as 0.24%.  We would note that, as with many ETF products, there is both the risks of Non-Correlation and Replication Management Risk:

• Non-Correlation Risk. The Fund’s return may not match the return of the Index for many reasons. For example, the Fund incurs a number of operating expenses not applicable to the Index, and incurs costs in buying and selling securities, especially when rebalancing the Fund’s securities holdings to reflect changes in the composition of the Index. Since the Index constituents may vary on a monthly basis, the Fund’s costs associated with rebalancing may be greater than those incurred by other exchange-traded funds that track indices whose composition changes less often.  The Fund may not be fully invested at times, either as a result of cash flows into the Fund or reserves of cash held by the Fund to meet redemptions and expenses. Since the Fund utilizes a sampling approach, its return may not correlate as well with the return on the Index as would be the case if it purchased all the securities in the Index with the same weightings as the Index. This would also apply to the extent the Fund uses futures or other derivative positions in lieu of investing directly in certain Index components.
• Replication Management Risk. Unlike many investment companies, the Fund is not “actively” managed. Therefore, it would not necessarily sell a security because the security’s issuer was in financial trouble unless that security is removed from the Index.

Other risks associated are derivative risks, fluctuation of yield and liquidation risks, extension risks, call risks, prepayments risks, and more.

These ETF products are seeking more and more strategies.  As with all, the details and the liquidity are what matter the most.

JON C. OGG

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