The pace of closures is a lot slower than in 2012.
ETF issuers have pulled the plug on 65 ETFs so far this year due mostly to these funds’ inability to attract assets. That’s about a 35 percent decline in the rate of closures year-on-year.
In 2012, just under 100 funds were shuttered, but this year the pace of closures has slowed in part as the result of a market that’s maturing as it heads into its 21st year. Today 1,536 ETFs trade on U.S. stock exchanges, boasting some $1.67 trillion in total assets.
It could also be the mark of caution, as ETF issuers wait to see what 2014 will bring before deciding whether their least popular funds will, in the end, fail to attract assets, ConvergEx’s Chief Market Strategist Nick Colas suggested.
“Most sponsors seem to have had pretty good years raising assets, so few have to shutter smaller products,” Colas told IndexUniverse. “I think ETF sponsors view their under-appreciated offerings—the ones with smaller AUMs—as call options.”
“There is also the sense around Wall Street that 2014 will be a different kind of year from the last few,” he added. “With the Fed tapering its bond purchases now, there should be less correlation among asset classes and more volatility as well—all the more reason to leave products on the shelf rather than retire them.”
Among this year’s most notable closures was the iShares Diversified Alternatives Trust (ALT), which was liquidated in June. The actively managed fund had managed to gather about $43 million in its 3 ½-year tenure, and invested in a mix of equity, fixed-income and currency futures and forwards.
ALT was iShares’ first ETF liquidation in more than a decade. The No. 1 ETF provider had not shut down a fund since 2002.
It’s PowerShares, however, that has the distinction of most funds closed this year—17 to be exact.
To be fair, four of them are actually being liquidated in February 2014, but their closure has already been announced. The remainder includes a broad mix of strategies tapping into everything from global wind energy to tactical growth equities to fixed income to coal.
Emerging Global Advisors also pulled the plug on half of its entire lineup of ETFs, although together, the 12 funds represented only 4 percent of the firm’s total assets. The list included EGShares’ entire global sector-specific GEMS suite as well as a metals and mining fund.
Guggenheim—the issuer increasingly known for its BulletShares target-maturity-date bond funds—pulled the plug on 10 ETFs this year, most of them equity funds. Those included a pair of leveraged and inverse S&P 500 strategies, two Wilshire funds and the market’s only airline-focused ETF, “FAA.”
The Illinois-based company also closed the Guggenheim Yuan Bond ETF (RMB). The fund had attracted only $2.6 million since it came to market in 2011.
As we head into 2014, about a fifth of ETFs in the market today are under IndexUniverse’s high-closure risk based largely on asset levels.
Most of them have less than $15 million in assets under management.