CSD’s underlying index “defines a spin-off company as any company resulting from either of the following events: a spin-off distribution of stock of a subsidiary company by its parent company to parent company shareholders or equity ‘carve-outs’ or ‘partial initial public offerings’ in which a parent company sells a percentage of the equity of a subsidiary to public shareholders,” according to Guggenheim.
Since all of those events could allow for turnover in the CSD portfolio, there is reason to consider that element of investing in this fund. However, spin-offs cannot enter the index “more recently than six months prior to the applicable rebalancing date,” according to Guggenheim.
Plus, a spin-off can be up to 30 months removed from the initial separation from its parent company and still be eligible for inclusion in CSD. Not to mention 32% turnover is slight compared to the percentages seen in some mutual funds.
CSD Asset Growth
Chart Courtesy: Research Puzzle