This post is the first in a planned series called Under the Hood, where I’ll take a detailed look at a specific ETF or index fund.
The fund: Claymore 1–5 Year Laddered Corporate Bond ETF (CBO)
The index: CBO tracks the DEX 1-5 Year Corporate Bond Index, which appears to have been custom-made for this fund. The index lays out a set of rules for building a laddered portfolio of short-term, investment-grade corporate bonds. It includes 25 bonds divided into five equal “buckets”: five of the bonds have a term to maturity of 1–2 years, five others have terms of 2–3 years, and so on up to 5–6 years.
The cost: The MER is 0.28% as of June 2009, including a management fee of 0.25%.
The details: Claymore launched this ETF just over a year ago and it has been very popular, with an average daily trading volume of about 115,000 shares. It’s a well-designed index: the laddering technique is an excellent way to achieve a balance between good yield and a minimum of interest-rate risk. (In most cases,