Van Eck Global said late Thursday that it started its planned offer for investors to exchange six Merrill Lynch-sponsored HOLDRS for shares of new Market Vectors exchange-traded funds. Investors can participate in the program through Dec. 20.
“We have structured the offers, in our view, to be investor friendly,” said Adam Phillips, managing director of ETFs at Van Eck Global, in a press release. “Potential benefits of participation include the opportunity for uninterrupted exposure to target industries, a partially tax-advantaged exchange, and no costs associated with the offers.”
According to Van Eck, the new ETF products–which were announced in August–offer investors a “more dynamic, diversified investment vehicle than HOLDRS, since ETFs are better able to reflect changes in the composition of industry sectors that inevitably occur over time.”
The six HOLDRS that can be exchanged for Van Eck ETFs through Dec. 20 are those in the following sectors: oil services (OIH), semiconductors (SMH), pharmaceuticals (PPH), biotech (BBH), retail (RTH) and regional banking (RKH).In contrast, Van Eck explains, HOLDRS use a depositary-trust structure, “which means that their initial portfolio of securities generally remains static over time.” ETFs generally are able to rebalance their portfolios periodically and thereby track an underlying index, according to Van Eck.
The new ETFs are expected to trade under the corresponding HOLDRS’ ticker symbols.
Potential benefits of participation include the opportunity for uninterrupted exposure to target industries, a partially tax-advantaged exchange, and no costs associated with the offers, according to Van Eck.
As part of the transaction, certain securities underlying the HOLDRS will be sold (and securities will be purchased). Thus, investors participating in the exchange offers are expected to recognize taxable gains or losses in respect of the securities that are sold.
Further information related to the exchange can be found online.