VanEck Shutters China Stock ETF

After 13 years of trying to entice investors to pursue targeted exposure to Chinese equities, VanEck is throwing in the towel by closing the $12.4 million VanEck China Growth Leaders ETF (GLCN). 

While the fund has experienced some strong runs—including a June 2015 peak and smaller rallies in January 2018 and February 2021—ETF investors have soured on its strategy. 

The fund is down nearly 60% from the 2021 peak and is down 11.7% so far this year. 

“China growth stocks have struggled mightily over the past several years,” said Nate Geraci, president of The ETF Store, a Kansas-based investment advisory that deals primarily with exchange traded funds. 

He added that the lagging performance, “combined with stiff competition from ETFs such as FXI and KWEB, makes this a really tough space to try and carve a path to success.”  

As of Sept. 8, the $5.2 billion iShares Trust China Large-Cap ETF (FXI) is down 2% this year, and the $5.9 billion KraneShares CSI China Internet ETF (KWEB) is down 4.4% this year. 

Eric Balchunas, ETF analyst at Bloomberg Intelligence, said VanEck likely held on for as long as it could, hoping investors and financial advisors would find a reason to allocate assets to the strategy, but it became increasingly out of favor. 

“Slicing and dicing China has been a challenge for everyone, and most people are happy having China exposure through emerging markets funds,” he said. “Most people just aren’t that interested in going that deep into China.” 

China ETF Waited for Market to Turn

VanEck announced its plans to close the ETF on Friday in a bare-bones press release that referenced “a number of factors, including performance, liquidity, assets under management, and investor interest” leading to the decision.  

The ETF will continue to trade through the market close on Sept. 20 and the fund will liquidate about a week later, according to the announcement. 

A representative for VanEck said the company is not commenting beyond the press release. 

Balchunas gives VanEck credit for “hanging in there for 13 years” waiting for the market to turn in their favor. 

“Van Eck knows as well as anybody that you never know when your number is up, and sometimes you just keep your line in the water,” he said.  

Balchunas said that in addition to the falling appeal of investing in China, the targeted VanEck fund was hampered because most diversified emerging market funds already offer between 25% and 30% exposure to Chinese equities.  

“This isn’t a shocker at all to me given how pronounced China already is in emerging markets funds,” he said. “If Amazon was 30% of the S&P 500, people wouldn’t worry about owning Amazon anymore.” 

Contact Jeff Benjamin at [email protected]