Exchange traded fund (ETF) provider Claymore announced last week that one of their closed end funds (CEFs) will be converting to an ETF.

But Heather Bell for Index Universe says this isn’t so radical as it may sound, because it’s what the Claymore/Raymond James SB-1 Equity Fund (RYJ) was designed to do. The fund contains a clause that after 18 months of trading, if it trades at a discount of 10% or more for more than 75 straight days, it will convert to an ETF.

The fund has been trading at a 52-week average discount of 10.15%, but periodically has dipped below the 10% threshold and restarting itself. Claymore’s board stepped in to put the conversion into effect because the discount has usually been well above the 10% mark.

The fund’s goal is capital appreciation, achieved by investing in equities rated "SB-1," or "Strong Buy 1." It’s most heavily weighted in information technology (24.4%), energy (18.3%) and consumer discretionary (17.4%). It’s up 8.8% year-to-date.

The conversion is still subject to approval by the shareholders. Claymore President Christian Magoon says they don’t anticipate any other Claymore CEFs converting to ETFs.


The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.