The Guggenheim Spin-Off ETF (NYSEArca: CSD) has seemingly drawn more attention and praise this year that any other point in its almost four years of trading.
Then again, the praise is warranted. Less than a month away from its fourth anniversary, CSD has gained 9.1% in the past 90 days, more than double what the S&P 500 has returned over the same time. Those familiar with CSD know the ETF’s sharp out-performance of broader market benchmarks is not a new theme. [Unheralded ETFs Hitting All-Time Highs]
Still, it is more useful to measure CSD against major small- and mid-cap indices because those are the cap designations that apply to most of CSD’s roughly 25 holdings. Over the past three years, CSD has trounced the iShares Russell 2000 ETF (NYSEArca: IWM) and the SPDR S&P MidCap 400 (NYSEArca: MDY) while being less volatile than both.
Chart Courtesy: ETF Replay
Whether it is the result of investors chasing performance or their need to be involved with some of the spin-offs held by CSD, a group that includes TripAdvisor (NasdaqGM: TRIP), Starz (NasdaqGM: STRZ-A) and Kraft (NasdaqGM: KRFT), the ETF has been impressive gatherer of assets this year. [10 ETFs That More Than Doubled in Size]
“This is another one of those ‘right place, right time’ ETFs,” writes Tom Brakke for Research Puzzle. “Clearly, whatever is in the Beacon Spin-Off Index, on which the fund is based, has been doing well. Now, will it keep doing well? This is a very interesting situation, because the nature of the index means that there’s a lot more turnover than what you might expect an ‘index’ to have.” http://rp-pix.com/
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