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The ETF industry has grown tremendously in 2011 adding several hundred products in a wide variety of sectors and asset classes. However, many of these new funds, along with several from the previous years, have failed to gain a meaningful amount of assets since their inceptions. This has put ETF issuers in a bind forcing them to weigh the prospect of shuttering a future winner too early or continuing to eat losses in hopes that investors will eventually be interested in a particular fund. After much consideration, it appears that two of the more innovative and smaller ETF issuers on the market, IndexIQ and Global X, have decided to shutter several of their products that haven’t been hits with investors (see Inside The SuperDividend ETF).
Combined, the two greater-New York City firms revealed plans to shutter 11 products in total, a figure that represents a decent chunk of their ETF offerings. While the funds may represent a decent percentage of the total lineups of the companies, they certainly don’t make up a large percentage of assets; the Global X funds represent just 2% of total AUM while IndexIQ’s closures are roughly 1% of the company’s assets. Below, we briefly discuss some of the funds that are being closed as well as the options investors will have to achieve similar exposure going forward (also read ALPS Shutting Down Two Commodity Producer ETFs).
IndexIQ ETF Closures
IndexIQ, the company best known for its lineup of small cap ETFs, announced that it would be closing three of its 17 funds including:
The three funds combined to possess just under $ 6 million in assets so it is pretty safe to say that they were money losers for IndexIQ. For alternatives, investors have large cap-centric funds in Hong Kong ( EWH - ETF report ) , and Taiwan ( EWT - ETF report ) , while Japan has a host of options targeting a variety of corners of the market. The products’ last day of trading will be on Friday, December 23, and investors who do not sell by then will have their shares automatically redeemed on December 30th, 2011 (read Avoid Turmoil With The Community Bank ETF).
Global X ETF Closures
Global X, which is a much larger ETF provider than IndexIQ with over $1.3 billion in AUM, announced the shuttering of eight funds in a recent press release including:
- Global X Russell Emerging Markets Growth ETF ( )
- Global X Russell Emerging Markets Value ETF ( )
- Global X Mexico Small-Cap ETF ( )
- Global X Oil Equities ETF (XOIL)
- Global X Farming ETF ( )
- Global X Fishing Industry ETF ( )
- Global X Food ETF ( )
- Global X Waste Management ETF (WSTE)
Of the eight funds, EATX had the most under management at just under $3 million while several more had less than two million in AUM. On the flip side, the Mexico Small-Cap ETF ( ) had just under $550,000 in assets, making it one of the smallest ETFs by that figure in the industry. In terms of alternatives, investors have many, although a number of the competing products do possess some differences despite tracking similar sectors (also read ETFs vs. Mutual Funds).
The only real hole that is left looks to be thanks to the loss of FISN as now there will not be any ETFs following the fishing industry niche, although it appears as though few investors will be broken up about this. The good news is that these eight funds from Global X still have a little time left for trading as the products will close to new investors and cease trading on the NYSE Arca at the end of the trading day on February 16, 2012 and will liquidate on February 27, 2012.
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