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Som Seif, President and CEO, Claymore Investments, Inc., Toronto. (Claymore Investments, Inc.)
Som Seif, President and CEO, Claymore Investments, Inc., Toronto. (Claymore Investments, Inc.)

Earlier Discussion

Dispelling the myths about ETFs Add to ...



[Comment From Som Seif]

I personally believe that traditional active management doesnt make sense in ETF structure. ETFs are great for low cost, low turnover and transparent strategies. If an active management can maintain these characteristics, then it can fit well inside an ETF. Otherwise, the strategy is best suited for a traditional mutual fund structure.



[Comment From richard ]

There was a big drop in the yield of your dividend fund this last year. Do you see that as a one time thing or will it continue to be volatile due to the market?



[Comment From Som Seif]

Hi Richard, CDZ is focused on companies that grow their dividend every year for 5yrs. This is really what drives the holdings, rather than absolute yield level. So last year we kicked out a bunch of companies that failed to grow their dividend and that is what caused the drop in yield. But the core to the strategy is what matters. But important, despite the lower yield, the total return has been fantastic. CDZ just crossed its 5 yr performance # and is top decile of all Canadian dividend funds and beat the benchmark dividend strategy by over 2% annualized. So yield matters, but strategy is more important.



Darcy Keith - A related question from Matt:



[Comment From Matt ]

What's most important when looking at the different Dividend ETFs? Yield? Cost? Performance?



[Comment From Som Seif]

Matt, i always say when investing, the strategy is the most important. You either have to believe its the right way to invest or not. Cost matters second, because the lower the closer you get to the real return. Yield is less important. Despite the dividend being important to long term returns, a high yield strategy doesnt necessarily mean better. Focus on what the strategy is and if you intuitively believe in it, thats why you invest.



[Comment From D Malkin ]

What are your thoughts on and responses to the problems of thinly traded ETFs (e.g. - CGR) and the potential for crowding in the marketplace as more providers duplicate most of the common and popular products?



[Comment From Som Seif]

Hi D, first its very important to understand that all ETFs have 2 levels of liquidity, and volume isnt the key to liquidity. ETFs are open end funds, and with the Designated Brokers posting bids/asks all day around the funds Net Asset Value, investors can buy and sell an ETF around NAV at anytime during the day...



[Comment From Som Seif]

So investors need to look at the bid/ask. With respect to new ETFs coming, i think its can be good innovation, but again, the most important thing to focus on is the underlying strategy of the ETF.



Darcy Keith - Som, I’m interested in hearing what ETFs are out there - and there are so many now - that retail investors should stay away from, no matter what. What funds are on your danger list? Or are worries about some funds that use complicated financial instruments overblown?



[Comment From Som Seif]

Darcy, its a tough question. See with the growth of the ETF industry, we've seen a lot of innovation, some good and some bad. I think the most important thing is understanding what an investor is trying to accomplish. Dont just buy an ETF because the name says something. Buy it because its strategy is good. Lots of questions around leveraged/inverse products. My perspective is that for majority of long term investors, these products dont make sense. But for investors who understand how these products work, they actually do deliver something that is hard to achieve...leverage and shorting capabilities. Same with commodities and other derivative based products. Its not to say they are bad, but you need to know how they work and what their expected outcomes will be.



[Comment From Chad Tennant, IA ]

The price of oil was pretty much flat through Oct 31st ($91.55 - $92.58). HOU, the popular Horizons leveraged commodity ETF was down 27.05% over the same period. Claymore does a great job of providing investor education, but do you think more needs to be done concerning complex ETFs that deviate from plain vanilla as to help investors make wiser decisions?

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