Fund manager

Finweek English Edition - - FUND IN FOCUS - Like any ETF,

you first need to cre­ate an in­dex upon which the prod­uct can be based and which sup­plies the in­tel­lec­tual prop­erty of how the ETF will buy and sell shares. In the case of the Guggen­heim Spin-Off ETF, the prod­uct is based on the Bea­con Spin-Off In­dex. So what does this do?

The Bea­con In­dex se­lects shares of com­pa­nies that have been spun off from larger par­ent com­pa­nies, not longer than 30 months prior, nor as re­cently as six months to the date in­dex re­bal­anc­ing takes place. While there are no lim­its on the size of com­pany that can be in­cluded, the in­dex pri­mar­ily fo­cuses on com­pa­nies in the small- and mid-cap space. In the con­text of the US mar­ket, that’s com­pa­nies with a mar­ket cap­i­tal­i­sa­tion of less than $10bn.

To de­fine a spin-off: think of the re­cent an­nounce­ment by BHP Bil­li­ton to spin off some of its non-core as­sets into a newly formed com­pany which will be called South32. South32 will be listed on a cou­ple of ex­changes, in­clud­ing the JSE. Share­hold­ers in BHP Bil­li­ton will re­ceive shares in the new en­tity that they can do with as they please. South32 is a clas­sic ex­am­ple of the type of com­pany the Guggen­heim ETF would seek to in­clude, by buy­ing the shares of South32 when it even­tu­ally lists.

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