PowerShares To Shut 10 ETFs

October 10, 2010

PowerShares is latest ETF firm to clean house, shutters 10 funds.

Invesco PowerShares, the Chicago-based exchange-traded fund company behind the successful “Qs” ETF of Nasdaq’s 100-biggest companies, will shut 10 ETFs on or about Dec. 21 to streamline its product lineup and focus its resources on other funds.

Dec. 14 will be the final day of trading for the funds, and shareholders who don’t sell their holdings on or before that date will receive a sum of cash, probably on Dec. 21, that will include the net asset value of their shares, plus any capital gains and dividends, the company said in a press release on Oct. 8.

PowerShares’ decision to shutter 10 of its ETFs is the latest in a string of closures in the past several weeks that has included Geary Advisors; Grail Advisors, and Claymore (which is now called Guggenheim Funds). Despite continued closings, the rate of fund shutterings is slower than it was in 2008 or 2009, when sponsors pulled 58 and 56 ETFs off the market, respectively, as Matt Hougan wrote in his recent blog “Industry Should Close 200 More ETFs.”

The funds, their tickers and their assets as of Sept 30 are:

  • PowerShares Dynamic Healthcare Services Portfolio (NYSEArca: PTJ), $14.6 million;
  • PowerShares Dynamic Telecommunications & Wireless Portfolio (NYSEArca: PTE), $16.3 million;
  • PowerShares FTSE NASDAQ Small Cap Portfolio (Nasdaq: PQSC), $1.2 million;
  • PowerShares FTSE RAFI Europe Portfolio (NYSEArca: PEF), $12.2 million;
  • PowerShares FTSE RAFI Japan Portfolio (NYSEArca: PJO), $7.4 million;
  • PowerShares Global Biotech Portfolio (Nasdaq: PBTQ), $3.72 million;
  • PowerShares Global Progressive Transportation Portfolio Nasdaq: PTRP), $5.65 million;
  • PowerShares NASDAQ-100 BuyWrite Portfolio (Nasdaq: PQBW), $5.5 million;
  • PowerShares NXQ Portfolio (Nasdaq: PNXQ) $3.73 million;
  • PowerShares Zacks Small Cap Portfolio (NYSEArca: PZJ), $14.4 million.

“Closure is the last option, but we had a handful, these 10, where we knew there was no other option,” Ben Fulton, a managing director of global ETFs at Invesco PowerShares, said in a telephone interview. “We’ve had them for a couple of years, and at some point you just have to realize that you can’t do a marketing campaign, there’s not a real change you could make to these products, so the one answer is to just close them.”

Fulton noted that after the May 6, “flash crash,” Invesco PowerShares intensified the examination of its funds that haven’t collected significant assets and could possibly be vulnerable to trading days when participants abandon the market.

“When you have a product that doesn’t have many assets and not a lot of people trading it, it might also have the propensity to not have as many market makers. So the same way we’re pushing exchanges to change, maybe we should realize we’re not getting the trading and support from the marketplace and that under certain situations a product like that might experience some kind of problem,” Fulton said.

Fulton said he was satisfied that for now the company wasn’t likely to close any more funds soon, though he acknowledged that such reviews are ongoing and any changes have to be approved by the Trust’s board.

He also stressed that in addition to the 10 closures, Invesco PowerShares has also added 12 new ETFs to its lineup over the past year. Those funds, including the PowerShares International Corporate Bond Portfolio (NYSEArca: PICB), have gathered $870 million, he said.

Invesco PowerShares is the fifth-largest U.S. ETF company by assets, with $50.21 billion under management at the end of the third quarter, according to data compiled by IndexUniverse.com.

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