The Claymore/BBD High Income Index ETF (LVL) started trading in late June 2007. It tracks the Benchmarks By Design High Income Index minus expenses and fees. The ETF seeks to hold at least 90% of the index's holdings.
The index is composed of 110 to 150 securities at any one time. It contains those securities that the index manager thinks have high income potential and superior risk/return profiles. The factors that go in to selecting securities include potential income, liquidity, market capitalization, and relative value. The index is rebalanced and reconstituted quarterly. It includes ADRs, closed end funds, common stocks, convertible securities, MLPs, preferred stocks, and REITs. Closed end funds are limited to 10% of the index while MLPs are limited to 25% of the index. Index selections are, on average, small cap value.
Note that closed end funds may include bond funds.
As of the end of June 2008, the Claymore/BBD High Income Index ETF had the following sector breakdown:
Basic Materials 3.11%
Consumer Discretionary 2.14%
Consumer Staples 1.55%
Closed End Funds 9.99%
Health Care 2.9%
The ETF employs a passive approach and rebalances quarterly. Expenses are capped at 0.6% until December 2009. They may be higher after that date.
Although this is subject to change, the Claymore/BBD High Income Index ETF pays dividends on a monthly basis. The dividend has been constant at $0.135 per share since August 2007. December distributions may vary. As the ETF holds REITs, MLPs, preferred stocks, convertible securities, and closed end funds, beware for tax purposes that its distributions can include regular income, short term and long term capital gains, and qualified dividends. As it owns ADRs, a portion of its dividends may be withheld by foreign tax authorities.
As of July 2008, the ETF held 110 securities. Its holdings are listed below.
Note that this ETF is very thinly traded. As of July 2008, its average daily trading dollar volume for the last three months is just over $51,000.