Claymore offers ETF PACs, DRIPs & SWPs

[parvus]

Claymore Investments announces revolution for ETF Industry in Canada, offering DRIP, PACC Plan and Systematic Withdrawal Plan on all Claymore ETFS

[Bylo Selhi]

So how is this going to work, i.e. does Claymore have "buy-in" from major discount brokers, especially on the PACC and SWF?

And since there's nothing proprietary about this I wonder when BGI will join the party.

[IdOp]

Unitholders who wish to receive cash distributions from the Claymore ETFs may opt-out of the Auto DRIP.

I don't like this, it's like negative-option marketing. Existing unitholders should not have to do anything to maintain the status quo under which they purchased their units. These guys obviously don't quite get it ("it" being consumer friendliness, rather than fattening their own pockets).

[brucecohen]

The ETF and mutfund worlds continue to converge.

From Advisor.ca:

Some of the major advantages mutual funds have enjoyed over exchange-traded funds — automatic investment and withdrawal programs — are no longer. Responding to increased advisor interest in ETFs, one provider has introduced a distribution reinvestment plan (DRIP), a pre-authorized cash contribution plan (PACC) and a systematic withdrawal plan (SWP) for its ETFs.

DRIPs, PACCs and SWPs are standard programs for retail mutual fund investors. While there are an increasing number of investors and advisors philosophically aligned with ETF investing, many have been deterred from using the product structure because there was no cost-efficient way to employ dollar-cost averaging or systematic withdrawals.

<snip>

Since ETF providers have comprehensive designated broker trading agreements, offering a service like this requires developing a separate agency to oversee the program and to create separate accounts for investors that choose the programs.

[queerasmoi]

http://www.claymoreinvestments.ca/etf/i ... vices/drip

Automatic Distribution Reinvestment Plan (Auto DRIP)

Effective February 2009, under the Automatic Distribution Reinvestment Plan (“Auto DRIP”), any distributions made by a Claymore ETF are automatically used to purchase additional units of the Claymore ETF making the distribution.

The Auto DRIP Important Information:

* There are no commissions or service charges related to the Auto DRIP.
* A Unitholder will receive any Units purchased under the Auto DRIP Plan on or about the 6th business day following the applicable distribution date.
* Units will be credited to each Unitholder’s account in which the Claymore ETF Units are held.
* No fractional Units will be issued under the Auto DRIP. Any remaining uninvested funds in lieu of fractional Units will be credited to Unitholder’s accounts via their investment advisor, discount broker, investment counselor, or other investment dealer where they hold the Units (“CDS Participant”).
* Participation in the Auto DRIP is restricted to Unitholders who are residents of Canada for purposes of the Income Tax Act (Canada).
* The reinvestment of the distributions will not relieve Unitholders of any income tax applicable to such distributions.

Opting Out of DRIP

Unitholders, who wish to receive cash distributions from the Claymore ETFs, may opt out of the Auto DRIP. To opt out, existing Unitholders must notify their CDS Participant of their intent to opt-out of the Claymore Distribution Reinvestment Plan. Deadline for notice will vary by CDS Participant.

Intriguing. I wonder if iShares will step up to the plate as well?

[DenisD]

http://www.claymoreinvestments.ca/etf/i ... rvices/faq

How will Units of the Claymore ETFs under the plans be purchased or sold?
Units purchased or sold under the plans will be purchased through the facilities of The Toronto Stock Exchange. The price of the Units purchased or sold on behalf of a Plan Participant will be based on the average price for which all the Units in respect of a given Distribution payment date were acquired or sold. Units purchased under the Auto DRIP and PACC Plans will be allocated pro rata based on their respective entitlement to the distributions used to purchase units.

Because of the low trading volume of most of their ETFs, I'm wondering if there's a risk of poor prices for units purchased or sold.

[squash500]

Because of the low trading volume of most of their ETFs, I'm wondering if there's a risk of poor prices for units purchased or sold.

Good point . Personally, I'm nervous to buy any claymore etfs at all due to the low trading volume. Another reason is that the claymore etf that I might buy today could be terminated in the next couple of months due to lack of investor interest. Just my opinion.

IMHO, this is another attempt by Claymore to gain much needed market share in the etf landscape. Will Claymore succeed or not? Who knows?

I'll stick with the ishares .

[IdOp]

I called TD Waterhouse to ask what I had to do to opt out of the Claymore auto-DRIP. The agent checked into it and said shares held at TD are not enrolled in the DRIP but they are investigating with Claymore to see how clients can enrol in the DRIP. I don't fully understand this answer, or how it all works, but the bottom line at the moment seems to be that more will be known in a week or so when TD has finished their enquiries with Claymore.

[brucecohen]

I called TD Waterhouse to ask what I had to do to opt out of the Claymore auto-DRIP. The agent checked into it and said shares held at TD are not enrolled in the DRIP but they are investigating with Claymore to see how clients can enrol in the DRIP. I don't fully understand this answer, or how it all works, but the bottom line at the moment seems to be that more will be known in a week or so when TD has finished their enquiries with Claymore.

Based on what advisor.ca reported (linked above), I think you have to open an account through Claymore to do the PAC/SWP/DRIP.

[IdOp]

Thanks brucecohen. I've re-read the advisor.ca article, but am still confused because the material on Claymore's website doesn't seem to mention any limitation on the DRIP applicability. I'll write to Claymore and see if they can clarify the situation.

[DavidR]

It seems to be more of a 'pseudo-DRIP' than a true DRIP, since fractional shares are not allowed. Fractions only work (I think) for open-ended mutual funds or for shares of publicly traded entities that are not held in street name..

[IdOp]

I received a response from Claymore, and a good one at that! To paraphrase:

* brokerages have not yet received the CDS bulletin on this matter, so that's why their answers are unclear.

* the DRIP will be automatic as stated on the Claymore website. To opt out you should contact the brokerage if the units are held there.

* wait at least a week to contact the brokerage for opting out, for they need to receive the above-mentioned bulletin before being able to do anything.

Hopefully this will turn out to work.

[Locke]

I'm hoping this would push ishares to do something similar

If only Claymore had more trading volume, I would consider their ETF's.

[Bylo Selhi]

I'm hoping this would push ishares to do something similar.

So is Carrick. Claymore helps make ETFs more user-friendly

These innovations are so significant that even Claymore's much larger competitor, the iShares family of ETFs from Barclays Global Investors, offered some praise. “I think it's doing the right thing for investors,” said Heather Pelant, head of iShares for Barclays Canada.

Ms. Pelant said Barclays is studying SWPs and other such plans. Don't be surprised if the ETF leader in Canada goes in a similar direction as Claymore at some point soon.

[DavidR]

Good article, but Carrick should get new batteries for his calculator. Regarding the DRIP, he writes:

The Claymore Cdn Fundamental ETF paid out a quarterly average of 5.7 cents a share in 2008, which means you'd need just 14 shares to generate sufficient dividends to buy a complete new share every quarter.

[squash500]

As usual, I'm always on the phone with tdw about something . I asked a tdw rep about the latest claymore news.

As of Friday Feb 6/09 the tdw rep had heard nothing about this latest claymore venture .

For that matter I'm not even sure if the tdw rep had ever heard of claymore etfs at all .

[makin]

I called Questrade, they only support DRIP plan.
They can not do PACC plan.

Does anybody know which discount broker supports both DRIP and PACC plan for claymore?

[makin]

I contacted claymore, and here is their reply:

---------
Thank you for your interest and support in Claymore ETFs. Regarding your questions, Claymore ETFs are listed on the TSX and can be purchased/traded in the same manner that stocks are. You would need to have an account set up through a Discount Brokerage (TD Waterhouse, RBC, etc.) or purchased through a securities lisenced Investment Advisor.

The automatic DRIP is available for our entire line up of Claymore ETFs and will commence at the end of February for our ETFs that have a monthly distribution (CDZ, CYH, FIE, CMR) and at the end of March for the remainder of our ETFs that pay their distributions quarterly. The distribution will be automatically reinvested unless you opt out by contacting your brokerage firm.

The reason why some of the brokerages may appear to be not aware of the new plans is because there was a slight delay with the communication bulletin sent out through CDS. This bulletin basically outlines the procedures for each of the brokerages in order to process these new Claymore innovations. We have received word that CDS sent out the bulletin late Friday afternoon. I would probably wait until the end of the week to allow some time for the brokerage firms to distribute this information internally.

-------------------------

It seems we have to wait till next week before I call Questrade or TD Waterhouse again.

[queerasmoi]

With a DRIP going, perhaps they should do something about their silly money market ETF (CMR) having a price of circa $50/share. At today's interest rates, you would need to invest over $32,000 in their monthly-interest ETF to get one share on the DRIP. Perhaps a split is called for?

That being said, if you don't make enough interest to earn a new share of the ETF, you could set up the PACC such that you'll buy that one solitary share each month.

[makin]

I contacted Questrade today; they don't offer PACC for Claymore Investments ETF. They only support DRIP.

Does anyone know which discount brokerage support both DRIP and PACC?

[queerasmoi]

In theory _all_ brokerages should support it... they just need to put a request through CDS, right?

[makin]

I have contacted TD Waterhouse Mutual Fund Specialist (FundSmart)
1-800-461-FUND (3863) as well; and they don't suport PACC plan too.

I only have two account; Questrade and TD Waterhouse.
Both do not support PACC plan.
They only support DRIP.

I am interested to know which Brokerage support both PACC and DRIP.

[queerasmoi]

I have contacted TD Waterhouse Mutual Fund Specialist (FundSmart)
1-800-461-FUND (3863) as well; and they don't suport PACC plan too.

Are you sure you were talking to the right person? ETFs are not considered mutual funds from the perspective of TD Waterhouse. I doubt a "Mutual Fund Specialist" would know anything about this.

[IdOp]

Talked to a TD-W President's Acct agent (who didn't seem particularly competant) about the Claymore auto-DRIP again. After checking into it, they said they are expecting an announcement by Claymore within the next few weeks, but no further details.

Total speculation: I wonder if Claymore has received objections to the automatic nature of the DRIP and will have to back off that aspect? We'll have to wait and see what happens, if anything.

[IdOp]

I received a letter from TD Waterhouse today re Claymore's auto-DRIP. This must be the announcement hinted at in the above post (so it's an announcement not by Claymore, but about Claymore by TD-W).

What TD-W is going to do is by default opt all of their client's Claymore holdings out of the auto-DRIP. Then, clients wanting to auto-DRIP must contact TD-W and opt back in. This effectively negates the auto aspect of the Claymore DRIP, and preserves the status quo with no action required for TD-W clients to do that. IMO TD-W has handled this the right way, despite what is probably an inconvenient set-up for them to do it this way. Thank you to TD for this.

If you hold Claymore at a different broker, you will have to contact them to find out what their policy is.