Van Eck, Merrill Lynch in Agreement Over HOLDRS

August 15th at 8:26am by Tom Lydon

Van Eck Global and Bank of America (NYSE: BAC) subsidiary Merrill Lynch have reached a deal in which Van Eck plans to offer investors in six HOLDRS the chance to swap for shares of new exchange traded funds.

Van Eck filed for six sector-specific ETFs with the Securities and Exchange Commission to issue the Merrill-Lynch HOLDRs as ETF products, write Oliver Ludwig and Cinthia Murphy for IndexUniverse. After the transition, the ETFs will maintain their original tickers for “uninterrupted exposure to target industries,” according to Van Eck. The whole transaction will be concluded in the fourth quarter.

The six of the 17 existing HOLDRS that Van Eck is acquiring have a combined $3.65 billion in assets, or around 90% of total assets under the HOLDRS investments.

“This transaction and the expected exchange offer includes HOLDRS with the highest assets and/or trading volume,” commented Adam Phillips, Van Eck’s managing director of ETFs, in the report, “and that, in our opinion, represent the best strategic fit for the Market Vectors suite of ETFs.”

HOLDRs are holding company depositary receipts and narrowly focused. The portfolio holdings never change.

“We believe ETFs offer significant advantages over HOLDRs in their ability to evolve with a dynamic underlying index,” Phillips stated in a press release. “This in turn leads to enhanced diversification and broader-based representation of a market or industry segment.”

Each of the new ETFs will have an annual expense ratio of 0.35%.

  • Market Vectors Biotech ETF (NYSEArca: BBH) will replace Biotech HOLDRS (NYSEArca: BBH). BBH which will track the 25 largest and most liquid companies in the biotechnology sector.
  • Market Vectors Money-Center Bank ETF (NYSEArca: RKH) will replace Regional Bank HOLDRS (NYSEArca: RKH). RKH will include the top 25 banks.
  • Market Vectors Oil Services ETF (NYSEArca: OIH) will replace Oil Services HOLDRS NYSEArca: OIH). OIH will hold the top 25 companies in the oil services industry.
  • Market Vectors Pharmaceutical ETF (NYSEArca: PPH) will replace Pharmaceutical HOLDRS (NYSEArca: PPH). PPH will track the top 25 drug companies.
  • Market Vectors Retail ETF (NYSEArca: RTH) will replace Retail HOLDRS (NYSEArca: RTH). RTH will cover the 25 largest, most liquid retail companies.
  • Market Vectors Semiconductor ETF (NYSEArca: SMH) will replace Semiconductor HOLDRS (NYSEArca: SMH). SMH will hold the top 25 U.S.-listed semiconductor companies.

For more information on new ETFs, visit our new ETFs category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.