Israel-Focused CHAI ETF Closes After Four Months

The first Israel bond fund is closing, five months after its launch.

According to a FactSet notification, the Defiance Israel Bond ETF (CHAI), which launched Dec. 13, will begin liquidating May 14. No reason for the liquidation was provided and the Miami-based company, headed by Sylvia Jablonski, declined to comment.

The fund that offered exposure to Israeli government and corporate bonds didn't catch on with investors, holding $2.43 million in assets, according to etf.com data. The fund, which trades at around $24.50, hasn't moved much from its first day closing price of $25.74. Defiance had originally launched the fund to “provide liquid access” to Israeli fixed income, the company’s press release stated. 

Defiance is closing the fund as protests spread on U.S. college campuses in response to Israel's military campaign in Gaza, which it launched in response to the Oct. 7 Hamas rampage. At the same time, exchange-traded fund closures are jumping: in the first three months of 2024, there have been 83 closures, while during the same period last year there were 62. Still, ETFs are pulling in record-breaking amounts of assets from investors, with total U.S. AUM at $8.9 trillion, according to ETFGI.

While the CHAI ETF did offer a unique exposure, investors weren’t biting.

“Nearly all ETF closures are caused by one thing—a lack of demand,” said etf.com analyst Sumit Roy. “While CHAI was only on the market for four months, in that time, it only accumulated $2 million in assets under management, far below the levels required to be profitable for the issuer.”

Closures Increase

Both the number of new funds on the market and the number of closures has increased in tandem, according to etf.com data.

Yet recent research from Bloomberg Intelligence suggests that many issuers pick inopportune times to close their funds. The Bloomberg study found that on average, ETFs that closed returned double after they shuttered.

Contact Lucy Brewster at [email protected].