BSJI: Guggenheim BulletShares 2018 HY Corporate Bond ETF

BSJI: Guggenheim BulletShares 2018 HY Corporate Bond ETF

The Guggenheim BulletShares 2018 High Yield Corporate Bond ETF (NYSEARCA: BSJI) is an exchange-traded fund issued by Guggenheim on April 25, 2012. BSJI tracks the general performance, before fees and expenses, of the Nasdaq BulletShares USD High Yield Corporate Bond 2018 Index, its benchmark index.

The benchmark index represents the performance of a U.S. dollar-denominated held-to-maturity portfolio of high-yield corporate bonds with effective maturities in 2018. The fund seeks to provide investment results corresponding to its benchmark index by allocating its portfolio in component securities in the index. As of June 30, 2015, BSJI has 149 holdings and generated an average annualized market price return of 6.04% since its inception date. The fund's past performance does not guarantee its future results.

As of June 30, 2015, the fund's top five holdings are 4.13% Spring Nextel Corporation 9% coupon bond maturing Nov. 15, 2018, 3.39% SLM Corporation 8.45% coupon bond maturing June 15, 2018, 2.04% VPII Escrow Corporation 6.75% coupon bond maturing Aug. 15, 2018, 2.02% CIT Group Incorporated 5.25% coupon bond maturing March 15, 2018 and 1.95% ArcelorMittal SA 6.13% coupon bond maturing June 1, 2018.

The fund's top 10 allocations are 22.43% in the finance sector, 8.3% in the consumer services sector, 7.74% in the non-energy minerals sector, 6.7% in the communications sector, 6.56% in the energy minerals sector, 5.36% in the electronic technology sector, 5.19% in the consumer durables sector and 5.01% in the process industries sector.

Characteristics

BSJI is legally structured as an open-ended investment company. The fund is listed on the New York Stock Exchange Arca, and it can be traded on multiple platforms on the secondary market. BSJI is advised by Guggenheim Funds Investment Advisors LLC and distributed by Guggenheim Funds Distributors LLC.

The fund's designated maturity date is Dec. 31, 2018 and will terminate near or on that date. On its target date, BSJI will unwind and distribute cash from its net assets to the shareholders.

The fund has a competitive expense ratio of 0.44%, while the average expense ratio of high-yield bond funds is 0.45%. The expense ratio does not include any broker or trading fees, which vary between investors.

Suitability and Recommendations

Like all investments, BSJI carries risk. These risks include junk bond risk, credit risk, default risk, call risk, interest rate risk, extension risk, non-diversified fund risk, income risk, liquidity risk and declining yield risk. Potential investors should understand the nature of the fund and its risks before considering an investment.

As of July 31, 2015, based on trailing three-year data, BSJI had an alpha (against the Bank of America Merrill Lynch U.S. High Yield Master II Total Return USD Index, its best-fit index) of 0.15, a beta (against the best-fit index) of 0.85 and a Sharpe ratio of 1.34. These statistics only represent past performance and are not indicative of the fund's future performance.

Based on modern portfolio theory (MPT), BSJI's alpha indicates it outperformed the Bank of America Merrill Lynch U.S. High Yield Master II Total Return USD Index by an annualized 0.15%. The fund's beta indicates it has a high correlation to its best-fit index. BSJI's Sharpe ratio indicates it was able to provide favorable returns on a risk-adjusted basis.

Due to BSJI's high yield corporate bond holdings, this ETF may not be suitable for investors who seek exposure to corporate bonds with high credit quality ratings. In terms of MPT, BSJI has a high risk profile with high potential returns. It is suitable for fixed-income investors with moderate to high risk tolerances seeking exposure to high-yield corporate bonds. The fund is also suitable for investors seeking to diversify their U.S. equity portfolios with high-yield corporate bonds. BSJI is best-suited for fixed-income investors interested in allocating a portion of their portfolio into high-yield corporate bonds with a moderately low level of volatility.