Invesco PowerShares has unveiled an ETF portfolio comprising closed-end funds (CEFs) on NYSE Arca.
The PowerShares CEF Income Composite Portfolio will issue monthly distributions, and is expected to go ex-dividend on 15 March.
The fund is based on the S-Network Composite Closed-End Fund index and will normally invest at least 80% of its total assets in securities of CEFs constituting the benchmark.
The index is rules-based and is designed to track the overall performance of US listed CEFs. It consists of 71 CEFs, 27 of which invest largely in taxable investment grade fixed income securities.
The benchmark also includes 15 CEFs investing primarily in high-yield fixed income securities, while 29 use an equity option selling strategy.
The ETF is a ‘fund of funds,' as it invests in the underlying index's constituent shares of funds. These constituent shares are selected from a universe of around 350 CEFs and are rebalanced in the index on a quarterly basis.
In order to be eligible for the index, the CEF must have an investment focus on either taxable investment grade fixed income, high-yield fixed income or option income.
The CEFs must also trade on a US stock exchange, have a minimum capitalisation value greater than $100m, a total expense ratio of less than 2% per year and an average daily turnover of more than $500,000 a day.
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