Van Eck Global has launched the Market Vectors Global Spin-Off ETF (NYSE Arca: SPUN), a new exchange-traded fund that seeks to benefit from the long-term potential of corporate spin-offs to unlock shareholder value.
Spin-offs are generally the result of large companies divesting smaller subsidiaries in a way that may not trigger traditional Wall Street analyst coverage. Historically, this has resulted in short-term valuation disconnects.
“A spin-off allows the new company to focus more intently on its core capabilities and often leads to an improvement in overall organizational efficiency,” said Brandon Rakszawski, Product Manager at Van Eck Global. “These companies typically are exposed to selling pressure in the short term and gain flexibility to create fundamental improvements to their business models in the longer term. We believe this creates a compelling investment opportunity for investors looking to exploit the spin-off cycle.”
SPUN seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Horizon Kinetics Global Spin-Off Index (the “Index”). The Index is distinguished from others in the market by its global developed markets exposure and its unique eligibility methodology. Unlike other similar indices, spin-offs are eligible to enter the Index early in their life cycle and remain in the Index for five years following their addition. The Index is rebalanced quarterly at which point constituents are weighted equally.
As of May 31, 2015, the Index was comprised of 87 components, with 69 percent allocated to U.S. companies, 21 percent to Western European companies, and 10 percent to Asian companies.
The Index provider Horizon Kinetics has produced spin-off industry research since 1996 and has covered nearly all U.S. spin-offs since that time. Horizon Kinetics initiated coverage of international spin-offs in 2010. The Global Spin-Off Report and The Global Spin-Off Calendar are among the firm’s publications.
Van Eck Global notes that an investment in SPUN is not without risks, which may include, among others, those associated with spun-off companies that may have limited liquidity, pricing inefficiencies, and that may be more speculative in nature than established companies. Foreign investments, specifically those in Europe and Asia, carry their own risks, including the potential for changes in currency exchange rates which may negatively impact the Fund’s return. Small- and medium-capitalization companies may be subject to elevated risks. The Fund’s assets may be concentrated in a particular sector and may be subject to more risk than investments in a diverse group of sectors.
SPUN has a gross expense ratio of 0.62% percent and a net expense ratio of 0.55% percent, which is capped contractually until February 1, 2017. The new ETF joins Van Eck Global’s family of strategic equity ETFs, including Market Vectors Morningstar Wide Moat ETF (MOAT) and the suite of Market Vectors MSCI Quality ETFs (QDEM, QEM, QDXU, QXUS).
About Van Eck Global
Founded in 1955, Van Eck Global was among the first U.S. money managers to help investors achieve greater diversification through global investing. Today, the firm continues this tradition by offering innovative investment choices in specialized asset classes such as hard assets, emerging markets, and precious metals including gold. Van Eck offers a broad array of Market Vectors ETFs spanning broad-based and specialized asset classes, and is one of the largest providers of ETPs in the U.S and worldwide. The Firm has offices around the world and managed approximately $30.5 billion in investor assets as of March 31, 2015.
An investment in the Fund may be subject to risks which include, among others, risks associated with spun-off companies that may have limited liquidity, pricing inefficiencies, and may be more speculative in nature than established companies, all of which may adversely affect the Fund. Foreign investments, specifically those in Europe and Asia, are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates which may negatively impact the Fund’s return. Small- and medium-capitalization companies may be subject to elevated risks. The Fund’s assets may be concentrated in a particular sector and may be subject to more risk than investments in a diverse group of sectors.
The Fund is not sponsored, endorsed, sold or promoted by Horizon Kinetics, LLC. Horizon Kinetics, LLC makes no representation or warranty, express or implied, to the owners of Market Vectors Global Spin-Off ETF or any member of the public regarding the advisability of investing in securities generally or in Market Vectors Global Spin-Off ETF.
Fund shares are not individually redeemable and will be issued and redeemed at their net asset value (NAV) only through certain authorized broker-dealers in large, specified blocks of shares called "creation units" and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market. You will incur brokerage expenses when trading Fund shares in the secondary market. Past performance is no guarantee of future results. Returns for actual Fund investments may differ from what is shown because of differences in timing, the amount invested, and fees and expenses.
Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds, in general, will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 888.MKT.VCTR or visit marketvectorsetfs.com. Please read the prospectus and summary prospectus carefully before investing.
Van Eck Securities Corporation, Distributor
335 Madison Avenue, New York, NY 10017
Mike MacMillan/Chris Sullivan