While investors have been quick to take on China as an emerging market equities play, Chinese yuan-denominated bonds have not been as popular. Consequently, Guggenheim Investments has announced it will be closing down its yuan bond exchange traded fund.
The fund sponsor, though, promises to utilize the freed-up resources to engineer new and innovative ETFs.
“Guggenheim remains committed to its leadership position in the ETF business and engages in a regular and thoughtful review of all of our products to ensure that we are meeting our clients’ needs,” William Belden, managing director for Guggenheim Investments, said in the press release. “ETF closures are a healthy part of the maturation of the industry, and enable providers to free up capital to develop new and innovative product offerings for investors.”
The Guggenheim Yuan Bond fund provides exposure to a basket of investment grade bond securities eligible for investments by U.S. and other foreign investors and denominated in Chinese Yuan. RMB is up 3.8% year-to-date and 3.8% over the past year. The ETF has a 2.0% 30-day SEC yield.
The fund will suspend its May monthly dividend distribution in anticipation of its liquidation.
Typically, ETF providers notify investors a couple weeks ahead of a closure, and the ETF would still operate as usual up to the close. As a fund closes, investors should use limit orders to exit the fund. However, if you hold onto the fund until it is liquidated, the investor will receive a full cash value equivalent to their exposure to the underlying holdings at the end price. [The Number of ETF Closures is Rising]
Guggenheim stated that liquidating distributions are expected to be paid to investors who have held onto the fund at around June 21, 2013.
Investors can still track China bonds through other ETFs, including the PowerShares Chinese Yuan Dim Sum Bond Portfolio (DSUM) , which has a 2.97% 30-day SEC yield, and Market Vectors Renminbi Bond ETF (CHLC) , which has a 2.11% 30-day SEC yield.
For more information on the ETF industry, visit our current affairs category.
Max Chen contributed to this article.
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