The Guggenheim Spin-Off ETF (NYSEArca: CSD) is no longer the only dedicated spin-off exchange traded fund available to investors as the Market Vectors Global Spin-Off ETF (NYSEArca: SPUN) made its debut today.
The Market Vectors Global Spin-Off ETF tracks the Horizon Kinetics Global Spin-Off Index (GSPIN), which is a rules-based, equal-weighted index intended to track the performance of listed, publicly-held spin-offs that are domiciled and trade in the U.S. or developed markets of Western Europe and Asia, according to Market Vectors.
As its name implies, SPUN is a global fund whereas the rival CSD is focused exclusively on U.S. spinoffs. Still, U.S. stocks account for nearly two-thirds of SPUN’s weight. Home to 87 spinoffs, SPUN allocates no more than 1.59% of its weight to any individual holding. Seven of the new ETF’s top 10 holdings are listed in the U.S., including Prothena (NasdaqGS: PRTA), Liberty Media (NasdaqGS: STRZA) and AbbVie (NYSE: ABBV). [Changes for the Spin-Off ETF]
Over time, performance differences between SPUN and CSD will become clear, but at the outset, there is a significant difference between the two funds investors need to note. The Horizon Kinetics Global Spin-Off Index can include spinoffs soon after those stocks come public and hold those names for up to five years. CSD can include spinoffs that have been spun-off over the past 30 months, but no more recently than six months before the time that ETF rebalances.
“For each company, an early entry at the start of the spin-off cycle aims to exploit valuation disconnects caused by selling pressure and pricing inefficiencies. A long-term hold seeks to capture periods of improved operating efficiency,” according to Market Vectors.
Like CSD, SPUN tilts away from large-caps, but the new spin-off ETF’s small-cap allocation is not overwhelming at 16.5%. Rather, SPUN is mid-cap focused as 56.3% of its weight goes to those stocks with 27.2% allocated to large-caps.
Stocks must have a minimum market value of $500 million and have an average 20-day dollar volume of $500,000 for inclusion in SPUN’s underlying index.
At 1.6%, China is the only emerging market represented in the new ETF. U.K. stocks account for 6.4% while Australia at 5.5% is the only other country to command a weight north of 5%. Overall, SPUN offers exposure to spinoffs hailing from 17 countries.
Consumer discretionary names account for over a quarter of the new ETF’s weight. Financials and industrial command 19.1% and 18.5%, respectively, of SPUN’s weight.
Chart Courtesy: Market Vectors