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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]

Hi Seamus, we agree, and thats why we actually launched the DRIP/PACC and SWP offering. We are the only firm in the world who offers Pre-Authorized Cash Contribution plan for ETFs (PACCs). So you can do this now on most platforms. Along with Scotia's no commission platform, Canadians can now dollar cost avg their investments like a mutual fund. BTW, i believe the discipline of dollar cost avg'ing is really a great strategy.

[Comment From Arthur Yip ]

Hi Som, I am interested in Claymore's justification for using RAFI Fundamental Indices. Have they shown to outperform comparable products? Have lower risks? Enough outperformance to justify its higher MER?

[Comment From Som Seif]

Hi Arthur, thanks for the question. We use the Fundamental Index strategy because its a better way to passively invest. Basics of it is it weights companies based on its fundamentals vs. market cap, trying to avoid the issue of linking price and weight together. The performance has been very strong. For example our Canadian RAFI ETF CRQ, has beat the benchmark over 5 yrs by over 1% annualized, but is also top decile of all Canadian equity mutual funds. The RAFI strategy really has been adding value. Passive investing is good, but you can be a little intelligent about how you actually select and weight companies.

Darcy Keith - Let's turn the discussion to interest bearing ETFs, and these two related questions from Bill and David:

[Comment From Bill ]

Som, which bond ETFs that produce higher yield do you like? Do you see them suffering when interests start to rise?

[Comment From David ]

Hi Som, your CLF and CBO ETF's have a yield of about 4 - 4.5%. How are you able to maintain such a good return when interest rates remain very low?

[Comment From Som Seif]

Bill/David, very important with bonds today because we are in a low interest rate environment, that Yield to Maturity is what every should always focus on. YTM is the coupon plus/minus the price movement of the bond back to par. Bond yields are meaningless. YTM is all that matters. With CLF and CBO their coupons are high because that is what the underlying coupons are and we have to pay them out, but the YTMs are much lower, more like 1.4-1.8%...

[Comment From Som Seif]

Regarding other bond funds, in the low interest rate environment, i believe investors should be looking to other areas such as corporate bonds, lower grade corporate bonds or HY bonds to get yield. If you assume that economies are improving and companies are doing well, then you can take some more risk with the quality of the bond to get yield. High Yield bonds currently are priced to give YTMs in the 7-9% range, which are very good. If you are worried about interest rates, look at something like CSD which has a nice yield, but also very low duration to avoid risks if interest rates start rising.

Darcy Keith - Here's a question from Bob, who has been patiently waiting for his chance (we've had many questions today!)

[Comment From bob ]

How does a "IA" get paid if he has me in ETF's?

[Comment From Som Seif]

Hi Bob, there are a few ways Advisors use ETFs with clients. First they may have a fee based approach where they charge the client directly a flat fee on all assets. Second, they may have a commission structure, where an Advisor charges for each trade of an ETF or a stock. Finally, an Advisor may use an ETF or mutual fund with embedded trailer fee. We have Advisor Class ETFs for this reason. Ultimately its very important that clients and Advisors discuss this and choose the best approach on an individual basis.

Darcy Keith - Here's a follow-up question from Brian, returning to the topic of bond and interest bearing ETFs:

[Comment From Brian ]

Does Claymore publish the current yield to maturity for its bond funds each day? If not how am I supposed to judge the investment without this information?

[Comment From Som Seif]

Hi Brian, yes on our website we publish the current Yield to Maturity daily (i believe its daily but i may be wrong and it may be update on a monthly basis as it doesnt change that often). We try to be as transparent as possible with this as its important.

[Comment From Mark ]

Is it just me or have the MERs on ETFs been creeping upwards a bit as they become more popular? Is that because of higher demand or because of more active management than the original ETF's (or both)

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