While Claymore has introduced some novel ETFs, plain-vanilla indexers such as myself have been content to give their offerings a wide berth. But, Claymore’s two new offerings, reported by Rob Carrick in The Globe and Mail, are certainly worth checking out.
The Claymore Premium Money Market ETF, which invests in a mix of T-bills and short-term instruments, will begin trading on Feb. 19. The MER is 0.25% and the ETF is positioned as a competitor for money market mutual funds, which typically charge a MER of 1%. It’s not clear to me that there are any advantages to the Money Market ETF. Investors with a smaller cash balance will stick to mutual funds because it is unlikely that the MER advantage of the ETF will overcome the cost of commissions to buy and sell. And those with larger cash balances could do as well or better with cashable GICs.
The Claymore 1-5 Yr Laddered Government Bond ETF (ticker symbol: CLF) is more interesting because it competes directly with the iShares CDN Short Bond ETF. As the name suggests, the ETF holds equal amounts of provincial, federal and agency bonds maturing in 1 to 5 years for an attractive MER of 0.15%, which is 10 basis points cheaper than XSB.
However, I am in no rush to sell XSB because the higher yield (due to corporate bond holdings) will more than wipe out the MER savings of switching to CLF. Still, Claymore should be applauded for introducing more competition in the ETF arena. On my wish list is a competitor to XRE, which at 0.55% is usurious by ETF standards.
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5 responses so far ↓
1 Joe // Feb 7, 2008 at 12:00 pm
Speaking of GIC’s - Any idea why rates are so different between companies?
I wonder why anyone would use a GIC when you can go with Altamira cash performer for between 3.5 and 4.0%. I know its not gauranteed - but its highly flexible and often pretty close to GIC rates.
2 FourPillars // Feb 7, 2008 at 12:49 pm
This is an interesting product.
I’ve read that retirees should have five years worth of expenses in cash so maybe this sort of product would work for that.
Mike
3 MillionDollarJourney // Feb 7, 2008 at 1:30 pm
CC, you are always on the cutting edge of new financial products.
I like the laddered bond ETF as it simplifies a “bond ladder” strategy for retirees.
4 Weekend Reading - Feb 8, 2008 | Million Dollar Journey // Feb 8, 2008 at 6:32 am
[...] Canadian Capitalist breaks the news to the blog world that there is a new bond ladder ETF in town! This may not be very exciting to some, but to me, it's provides an easy and cheap way to setup a bond ladder without buying the bonds individually. [...]
5 mylund // Feb 28, 2008 at 10:24 am
Fist post.
Joe, yesterday I replaced all of my Altamira H-Cash now paying 3.60% for 4.50% one year GIC with INGDIRECT.Does anyone have negative experiences with ING?
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