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“Natural selection” leads Claymore Securities to close 11 ETFs


Lisle, Illinois-based exchange-traded fund provider Claymore Securities has announced plans to liquidate several ‘lightly-followed’ ETFs representing less than 2 per cent of the firm’s US

Lisle, Illinois-based exchange-traded fund provider Claymore Securities has announced plans to liquidate several ‘lightly-followed’ ETFs representing less than 2 per cent of the firm’s US ETF assets later this month, but at the same time it says a new China small cap ETF will be the first of several launches this year.

‘There is a natural selection process when it comes to investment options and we will continue to offer products where there’s the potential for marketplace appeal,’ says Christian Magoon, senior managing director and head of the ETF group at Claymore Securities. The funds to be closed have between USD1.2m and USD5.1m in assets.

Claymore, which provided supervision, management, servicing or distribution on some USD18.5bn in ETF, unit trust and closed-end fund assets at the end of last year, launched the Claymore/AlphaShares China Small Cap Index ETF on the American Stock Exchange on January 30 and says it plans to launch several further ETFs this year.

February 19 will be the last day of trading in the Claymore/BIR Leaders 50, Claymore/BIR Leaders Mid-Cap Value, Claymore/BIR Leaders Small-Cap Core, Claymore/Robeco Boston Partners Large-Cap Value, Claymore/LGA Green, Claymore/KLD Sudan Free Large-Cap Core, Claymore/Clear Mid-Cap Growth Index, Claymore/Zacks Growth & Income Index, Claymore/IndexIQ Small-Cap Value, Claymore/Robeco Developed World Equity and Claymore/Clear Global Vaccine Index ETFs.

The Amex will halt trading in the funds before the open of trading on February 20, and the funds will be closed to new investment on that date. Shareholders may sell their holdings prior to February 20 through their broker-dealers, otherwise all shareholders in the funds remaining on February 28 will receive the value of their shares as of that date, including any capital gains and dividends.

The Claymore/AlphaShares China Small Cap Index ETF is the first ETF focused on small-cap Chinese companies and Claymore’s second China-focused ETF. ‘Gaining exposure to Chinese small caps can be difficult because most other Chinese investment products are market-cap based,’ Magoon says.

‘In those ETFs, small caps represent only a small percentage of assets at best and in the most widely held Chinese ETF, small caps currently have no representation. But investors now have the opportunity to diversify among existing Chinese investments through exposure to small cap companies.’

The fund’s underlying index is provided by AlphaShares, whose chief investment officer, Princeton University economist Burton G. Malkiel, is the author of From Wall Street to the Great Wall: How Investors Can Profit from China’s Booming Economy (as well as of A Random Walk Down Wall Street).

‘China’s 1.3 billion residents are consuming more, creating more and with the country’s increasing economic clout, they’ve become important global consumers,’ Malkiel says. ‘This is an opportunity for retail investors to access the emerging small cap market in China. Because historically most investment has been in large cap Chinese stocks, we feel the valuations of small cap stocks are attractive and present good potential for long-term growth.’

The Claymore/AlphaShares China Small Cap Index ETF will normally invest at least 90 per cent of its total assets in common stock, American depositary receipts, American depositary shares, global depositary receipts and international depositary receipts that comprise the index, which is rebalanced and reconstituted annually.

The index, maintained by Standard & Poor’s, seeks to measure and monitor the performance of publicly-traded mainland China-based companies whose shares are open to foreign ownership. These include all Hong Kong-listed securities including China H-Shares and Red Chips, and N-Shares trading in New York and their equivalents in other foreign markets, but not China A-Shares or China B-Shares, nor debt or quasi-debt securities such as convertible securities.

A minimum float-adjusted market capitalisation of USD200m and a maximum of USD1.5bn are used to determine initial portfolio construction and eligibility, while a minimum capitalisation of USD150m and maximum of USD1.75bn are required for ongoing inclusion in the index.

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