PrefBlog

According to the Globe & Mail:

Standard & Poor’s Corp. plans to start a new Canadian preferred share index comprised of 52 different issues with a total market capitalization of $14.1-billion…. 

The new index will include all types of investment-grade preferred shares.

It is expected that an exchange-traded fund will be created to allow yield-oriented investors to trade or invest in the index, Mr. North said.

Presumably this is the index planned for the Claymore ETF but I cannot find confirmation of this speculation. I’ll bet a nickel on it, though!

This should be good for the market – it will bring in new investors and create inefficiencies that will reward informed active management.

Update & Bump: The actual press release – not the Globe & Mail rewrite – is on the S&P Website – the “Index News” page, press release of April 3, 2007.

This index has actually been developed for the TSX. Whether or not Claymore intends to use this index rather than a proprietary one is not addressed, but I’ll be willing to bet – here goes another nickel! – that they do.

Index performance is listed as

I know perfectly well that the above table does not make clear just what exactly the end-date of the periods is. Sue me. I suspect that the period end-dates are 2/28, but the press release does not make this entirely clear.

Regardless, it’s apparent that the index construction is very different from the BMO NB-50, since one-year and two-year figures are wildly different. The three year, though, is roughly more or less sort of equivalent, kinda.

This construction difference is apparent from the release. The top three constituents are GWO.PR.X, BCE.PR.A and BCE.PR.C. You know what I like? I like indices that are easy to beat, that’s what I like. I might even be able to earn my fees just by avoiding those things and closet indexing the rest of the portfolio!

Update, 2008-6-30: The last paragraph was referenced by Larry MacDonald in Canadian Business Online, April 12, 2007. Well … I did beat the index in year to March 31, 2008 … but it wasn’t due to simple avoidance of those issues! The prolonged bear market in preferreds continues.

This entry was posted on Wednesday, April 4th, 2007 at 11:34 pm and is filed under Miscellaneous News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.