Investment advisors are the biggest buyers of these types of funds but many investors are waiting the time out to see how these materialize at maturity. Guggenheim BulletShares 2011 Corporate Bond liquidated successfully at the end of last year, the first in the series to mature, and more advisers are now showing interest, William Belden of Guggenheim said in the report. [Corporate Bond ETFs Target Specific Maturities]
The drawback to these types of ETFs is that distributions could fluctuate after additional shares are created when interest rates rise or fall. Rising interest rates equal falling bond prices. Since the end result, or distribution, of these funds are unknown, investors have been slow to warm up. This has led to liquidity issues and in turn, larger bid/ask spreads.[Treasury ETFs Rise as U.S. Bond Prices Closed]
For now, providers that have a foothold in this sector of the bond ETF market, BlackRock and Guggenheim, will continue to offer the products and may even expand offerings.
Defined maturity ETFs from Guggenheim:
- Guggenheim BulletShares 2012 Corporate Bond ETF (NYSEArca: BSCC)
- Guggenheim BulletShares 2013 Corporate Bond ETF (NYSEArca: BSCD)
- Guggenheim BulletShares 2014 Corporate Bond ETF(NYSEArca: BSCE)
Tisha Guerrero contributed to this article.