Van Eck Global has launched the Market Vectors Global Spin-Off ETF (NYSE Arca: SPUN), a new exchange-traded fund that seeks to benefit from the long-term potential of corporate spin-offs to unlock shareholder value.
Spin-offs are generally the result of large companies divesting smaller subsidiaries in a way that may not trigger traditional Wall Street analyst coverage. Historically, this has resulted in short-term valuation disconnects.
“A spin-off allows the new company to focus more intently on its core capabilities and often leads to an improvement in overall organizational efficiency,” says Brandon Rakszawski, Product Manager at Van Eck Global. “These companies typically are exposed to selling pressure in the short term and gain flexibility to create fundamental improvements to their business models in the longer term. We believe this creates a compelling investment opportunity for investors looking to exploit the spin-off cycle.”
SPUN seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Horizon Kinetics Global Spin-Off Index. The Index is distinguished from others in the market by its global developed markets exposure and its unique eligibility methodology. Unlike other similar indices, spin-offs are eligible to enter the Index early in their life cycle and remain in the Index for five years following their addition. The Index is rebalanced quarterly at which point constituents are weighted equally.
As of 31 May, 2015, the Index was comprised of 87 components, with 69 per cent allocated to US companies, 21 per cent to Western European companies, and 10 percent to Asian companies. The Index provider Horizon Kinetics has produced spin-off industry research since 1996 and has covered nearly all US spin-offs since that time. Horizon Kinetics initiated coverage of international spin-offs in 2010. The Global Spin-Off Report and The Global Spin-Off Calendar are among the firm’s publications.
