Claymore launched two new ETFs yesterday that on the surface look interesting and one of the two looks very unique while the other one looks like a different twist on on an existing theme.The first one is the Country Rotation Fund (CRO). The idea is to pick countries, presumably from the EAFE basket as EAFE is the benchmark, that it feels offer a better risk return profile based on some sort of undisclosed process. Then it picks stocks based on some sort of relative value, corporate growth model that is not spelled out very clearly.
The UK is the largest country weight at 25% followed by Australia at 12%, a bunch more between 4.5% and 10% followed by a 0.17% in Ireland. The country selection includes macro economic factors so I am surprised how little weight Ireland has and more surprised that Norway has no weight. I am sure it can be justified just fine but still.
It is easy to be skeptical of a rotation fund but the other fund like this that rotates domestic sectors, ticker XRO, has clocked the S&P 500 since its inception. Its up abut 22% compared to SPX' 15%. It has only been ten months or so but when a "gimmick" fund with a great back test lives up to its own hype it is tough to expect it to do better than great.
The other fund is the International Yield Hog (HGI). It is heaviest in the UK at 18%, US 11%, Canada 8% and plenty of other countries with smaller weights. Like the domestic Yield Hog, which I own for a couple of folks it goes to all sorts of different products to get yield; it owns stocks, CEFs, Canadian Trusts, MLPs and emerging market ADRs.
The hog strategy has worked fairly well since the domestic inception. It has lagged the S&P 500 by about 4% but has beaten DVY, which I own for a few clients, by about 3%. you can decide for yourself whether that equates to success.
The idea of high yielding foreign was first put out there in an ETF from PowerShares with PID. Since then WisdomTree came into being with a bunch of funds and Barclays just listed is EPAC Dividend Fund (IDV). I might be forgetting one or two more.
Neither fund has exposure to Japan which could allow them to pull away from EAFE, if Japan continues to struggle. CRO is very heavy in the financial sector but surprisingly HGI is not.
One weird thing about the release of these funds is that there appears to be no published back test, at least I didn't see one in the spot where they put the back test results for the other funds.
Claymore has cranked out a lot of funds lately and a lot of them strike me as gimmicks but it seems to me that they deliver more often than not which makes thinking of them as gimmicks unfair. Obviously I have no idea how either of these will do, I tend not to buy ETFs right out of the chute and I am holding off here too but these are worth watching.
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Hi Roger:
One question for you. One of the criticims of mutual funds is that in addition to the stated fee on the prospectus, the fund also incurs some hidden costs - when they buy and sell shares of the companies they hold.
In the case of a country rotation ETF like CRO, or sector rotation ETF XRO - claymore charges expenses (aroun 0.65% for CRO) for creating the ETFs.
Are there other hidden costs which investors are not aware of. For example, if XRO when it rebalances semi annually, will the costs of trading etc. be passed on to the customers as additional fee? (I think this is how mutual funds operates, am I right?). Or in the case of ETFs, when they rebalance semi annually, will the addtional trading costs be absorbed by the ETF provider?
Also another clarification.
1. XTF.com offers separately manged accounts through fidelity - where they implement sectory rotation and country rotation strategies. But Claymore has now made these strategies available in the form of ETFs. I realie that the holdings in XTF and CRO might not be the same - though they might follow the same strategy.
Can you pl. discuss the advantages and disadvantages of both these approaches - same strategy implemented by XTF.com as SMA and Claymore as ETFs. Is there a way to judge the quality of holdings (translating to performance) of these two offerings.
Sorry for the lengthy post.
yours sincerely,
strange
When you look at ETFs like this that supposedly give a great yield, do you only look at possible capital gains, or do you consider the actual yield?
One of the things that bugs me about the lack of data for new ETFs like Claymore Yield hog (CVI), International yield hog (HGI) and, for instance, the Wisdomtree ETFs is that it seems about impossible to determine a yield, if there is one.
Great post Roger....
Has you also looked at ENY from Claymore?
Sorry if you mentioned it in an older post....
What about the foreign tax withholding on the International Yield Hog ETF? Does Claymore address that? The Canadians go right into your IRA to take their share!! That just started last December I think...
Thanks,
Linda P.
Does anyone have suggestions for a ETF portfolio that would be funded with 50-100K? I know this is an open ended question, but I'm 38 years old and looking for growth. I've thought of going with the following:
VTI 17%
VO 17%
VB 17%
EFA 15%
VWO 10%
PGJ 3%
VNQ 4%
VDE 7%
EWA 5%
EWL 5%
most of these questions seems to be close enough to weave them into a followup post, which I will work on shortly.
Re the portfolio; two questions and a suggestions. Do you realize that you will be about double weighted in emerging markets? Do you know what your total weight in energy will be?
My suggestion is to take the free trial from Morningstar and PortfolioScience.com to analyze your plan.
Tomorrow Wisdomtree Emerging Markets Dividend etf starts trading symbol DEM. They say the yield is over 6% and backtested has beaten EEM for all periods.
Any opinions on this one?
I received an email about it this morning and am working on a TSCM post about it now. You can read more here from WT.
It appears to be a little different in terms of composition from the other broad-based EM funds. I get the yield at 5.48% (6.11% per the index page minus the 63 beep fee) which is still miles ahead of the others.
I don;t have a final conclusion just yet, I need to spend a little more time thinking about it. Feel free to leave your thoughts.
roger, can you dig up more information about those lipper etf funds? Breakdown/content? Availablity? thx.
Anon. 8:47.
You also might want to look into EEB to add a little Latin American play. And DLS is a good international small cap play as well.
I bought EEB (a BRIC) in mid April and it's up slightly over 25% in 3 months. DLS seems to out perform most of Wisdom Tree's other general stock offerings too. (As opposed to sectors like energy)
And rather than VNQ you might want to consider HTE, a good Canadian trust energy play, if you're chasing yield. It's currently yielding over 13%, and it goes up with oil. I'm up about 14% in less than 2 months not counting the yield. But if you look at the charts of these Canadian oil trusts you will see that they go down in September through December. I like to buy and hold them January through August and then sell).
REITs right now may not be very good with the real estate market falling. I would check them again in Feb-March.
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