Market Vectors Launches BIZD, a Business Development Company-Focused ETF
Feb 12th 2013 10:21AM
Updated Feb 12th 2013 11:40AM
Market Vectors Launches BIZD, a Business Development Company-Focused ETF
ETF is first to offer pure-play exposure to traditionally high-yielding "BDCs"
NEW YORK--(BUSINESS WIRE)-- Market Vectors ETF Trust today launched the Market Vectors BDC Income ETF (NYSE Arca: BIZD), the first exchange-traded fund (ETF) designed to provide pure-play exposure to business development companies (BDCs).
"Business development companies have traditionally been high-yielding, making them an attractive choice in today's ongoing search for income," said Brandon Rakszawski, product manager for Market Vectors ETFs. "Investing in BDCs provides exposure to private companies that many investors could not otherwise access, allowing for potential growth and yield generation."
BDCs' principal business is to lend capital or provide services to privately-held companies or thinly-traded U.S. public companies. To qualify as a BDC, a company must be organized under the laws of, and have its principal place of business in the U.S.; be registered with the Securities and Exchange Commission; and have elected to be regulated as a BDC under the Investment Company Act of 1940 ("the 40 Act").
BIZD seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors US Business Development Companies Index (MVBIZDTG), a rules-based index intended to track the overall performance of publicly traded business development companies. To be eligible for the index, a BDC must also have a market capitalization in excess of $150 million, a three-month average daily trading volume of at least $1 million, and a minimum trading volume of 250,000 shares each month in the previous six months.
Market Vectors notes that an investment of this kind is not without risks. BDCs invest in private companies and thinly traded securities of public companies, including the debt instruments of such companies, making them potentially susceptible to issues arising out of bankruptcies or defaults. Additionally, limitations on asset mix and leverage may make it difficult for BDCs to raise capital and BDCs may be more adversely affected by market volatility than more diversified investments.
An SEC rule addressing funds of funds (such as BIZD) adopted in 2006, requires a fund of funds to report a total expense ratio in its prospectus fee table that accounts for both the expenses that a fund pays directly out of its assets (sometimes called "direct expenses"), as well as the expense ratios of the underlying funds (including BDCs) in which it invests (often called "acquired fund fees" or "indirect expenses"). The disclosure of the fund's indirect expenses in the fund's fee table is contained in the acquired fund fees and expenses (AFFE) line item. This disclosure is designed to provide investors with a better understanding of the actual costs of investing in a fund that invests in other funds, which have their own expenses that may be as high, or higher, than the acquiring fund's expenses. Accordingly, the prospectus for BIZD discloses its AFFE which is expected to be 7.16%. However, because these fees are not borne directly by the Fund, they will not be reflected in the expense information in BIZD's financial statements and the information presented in the prospectus table will differ from that presented in BIZD's financial highlights included in BIZD's reports to shareholders, when available. The direct expenses that will be borne by BIZD are anticipated to be 0.40%.
About Market Vectors ETFs
Market Vectors exchange-traded products have been offered since 2006 and span many asset classes, including equities, fixed income (municipal and international bonds) and currency markets. The Market Vectors family totals $27.6 billion in assets under management, making it the fifth largest ETP family in the U.S. and eighth largest worldwide as of December 31, 2012.
Market Vectors ETFs are sponsored by Van Eck Global. Founded in 1955, Van Eck Global was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues this tradition by offering innovative, actively managed investment choices in hard assets, emerging markets, precious metals including gold, and other alternative asset classes. Van Eck Global has offices around the world and managed approximately $36.6 billion in investor assets as of December 31, 2012.
Expenses are capped contractually until at least 9/1/2014. Cap Excludes certain expenses, such as interest and Acquired Fund Fees and Expenses.
Business Development Companies (BDC) invest in private companies and thinly traded securities of public companies including debt instruments of such companies. Generally, little public information exists for private and thinly traded companies and there is a risk that investors may not be able to make fully informed investment decisions. Less mature and smaller private companies involve greater risk than well-established and larger publicly-traded companies. Investing in debt involves risk that the issuer may default on its payments or declare bankruptcy and debt may not be rated by a credit rating agency. BDCs may not generate income at all times. Additionally, limitations on asset mix and leverage may prohibit the way that BDCs raise capital. The Fund and its affiliates may not own in excess of 25% of a BDC's outstanding voting securities which may limit the Fund's ability to fully replicate its index. The Fund is currently concentrated in the financial services sector and may depend to a greater extent on the overall condition of the sector. The Fund may loan its securities, which may subject it to additional credit and counterparty risk.
Fund shares are not individually redeemable and will be issued and redeemed at their 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.
Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 888.MKT.VCTR or visit vaneck.com/etf. Please read the prospectus and summary prospectus carefully before investing.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 888.MKT.VCTR or visit marketvectorsetfs.com . Please read the prospectus and summary prospectus carefully before investing.
Mike MacMillan/Chris Sullivan, 212-473-4442
KEYWORDS: United States North America New York
The article Market Vectors Launches BIZD, a Business Development Company-Focused ETF originally appeared on Fool.com.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.