BlackRock to close “speculative” Claymore inverse bond ETF

Apr 2nd, 2012 | By | Category: Alternatives / Multi-Asset

BlackRock Canada has announced that it will terminate the Claymore Inverse 10 Yr Government Bond ETF (CA: CIB), a Toronto-listed fund designed to replicate the inverse of the daily total return before fees of the 10-Year Government of Canada Bond.

BlackRock to close "speculative" Claymore inverse bond ETF

Mary Anne Wiley, Head of iShares, BlackRock Canada, said the Claymore fund was "speculative in nature" and didn't fit with "the iShares brand or product philosophy".

Claymore, a Canadian ETF provider and the original sponsor of the fund, was recently acquired by BlackRock, the company behind iShares.

On termination all proceeds received from the liquidation of the fund’s assets less all liabilities and expenses will be distributed to unitholders.

The decision to close the fund comes after BlackRock proposed late last year a series of regulatory reforms and recommendations for enhanced disclosure and transparency.

In essence, the proposals put forward by BlackRock called for a return to ETF basics, with a renewed emphasis on the founding principles of first generation ETFs – namely the physically-replicated ETF structure.

Blackrock has argued that, while ETFs continue to provide investors with a low cost and efficient way to access a wide variety of asset classes, the ETF landscape has become clouded as a result of the proliferation of increasingly complex ETFs and related exchange-traded products, such as ETNs and ETCs.

Some of these products, BlackRock suggests, have failed to maintain the high standards of transparency and disclosure expected from investors.

Indeed, it would appear that in some cases the roll out of more exotic exchange-traded products has introduced a degree of opacity and risk, as demonstrated by the recent calamity surrounding the VelocityShares Daily 2x VIX Short-Term ETN (NYSE: TVIX).

Commenting on the closure, Mary Anne Wiley, Head of iShares, BlackRock Canada, said: “We believe in providing products that will help investors build robust portfolios and achieve their savings and investment goals. Given the fund’s mandate is speculative in nature and designed for short-term use, we don’t believe it fits well with the iShares brand or product philosophy”.

BlackRock Investments expects that the fund will be terminated on or about 22 June, 2012 and that proceeds will be payable to unitholders on or shortly after the termination date.

It should be noted that the fund has less than $3m in assets and would have likely been considered sub-scale – a factor which presumably would have contributed to the decision to close the fund.

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