VanEck to close spin-off and EM sovereign bond ETFs

Jun 25th, 2018 | By | Category: Fixed Income

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VanEck has announced it is closing two of its US-listed ETFs, comprising an equity thematic fund and an emerging market sovereign bond fund.

VanEck to close spin-off and EM sovereign bond ETFs

The ETFs will cease trading on NYSE Arca on 31 July 2018.

As of 31 July 2018, the VanEck Vectors Spin-Off ETF (SPUN US) and the VanEck Vectors EM Investment Grade+BB Rated USD Sovereign Bond ETF (IGEM US) will cease trading on NYSE Arca.

Shareholders who continue to hold the funds after this date are expected to receive liquidation proceeds around 7 August 2018.

SPUN tracks the Horizon Kinetics Global Spin-Off Index, an equal-weighted index composed of publicly held spin-off companies listed in developed markets. The event-driven strategy is based on the notion that recently spun-off firms exhibit value creation and an outperformance of their shares.

The theory states that spin-off companies should become more focused businesses with management dedicated to the new firm’s core operations. Investors can also value the company as a stand-alone business, avoiding the discount which is often applied when valuing less focused conglomerates.

SPUN failed to create buzz with investors and currently has just $5 million in assets under management.

Investors still wishing to partake in this investment approach may wish to consider the Invesco S&P Spin-Off ETF (CSD US) which tracks the S&P US Spin-Off Index and invests exclusively in US equities that have recently been spun-off. It has an expense ratio of 0.62%.

IGEM tracks the JP Morgan Custom EM Investment Grade Plus BB-Rated Sovereign USD Bond Index, composed of primarily investment grade US dollar-denominated bonds issued by emerging market governments.

It has larger than SPUN but with just $11.6m in assets it has also been slated for closure.

Investors may obtain similar exposure from a number of US-listed ETFs. The largest is the $12.4 billion iShares JP Morgan USD Emerging Markets Bond ETF (EMB US). Listed on Nasdaq Exchange, EMB tracks the JP Morgan EMBI Global Core Index and costs 0.39%.

Alternatively, the Vanguard Emerging Markets Government Bond ETF (VWOB US), which tracks the Bloomberg Barclays USD Emerging Markets Government RIC Capped Index, offers cheaper access with an expense ratio of 0.32%. It is also a fairly sizeable fun with $1.2bn in AUM.

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