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ETF News And Commentary

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While it appeared as though the year of closures was finally over for the ETF world, it now looks as though one more big wave is due to hit the market on this front, this time courtesy of PowerShares. One of the dominant players in the industry, the Chicagoland-based firm revealed plans to shut down 13 ETFs from its lineup thus reducing its total below the 120 fund mark.

The impacted ETFs includes the following products:

Dynamic Insurance Portfolio

Morningstar StockInvestor Core Portfolio

Dynamic Banking Portfolio

Global Steel Portfolio

Active Low Duration Portfolio

Global Wind energy Portfolio

Active Mega Cap Portfolio

Global Nuclear Energy Portfolio

Ibbotson Alternative Completion Portfolio

RiverFront Tactical Balanced Growth Portfolio

RiverFront Tactical Growth & Income Portfolio

Convertible Securities Portfolio

The vast majority of the aforementioned products never really caught on or were unable to fight past a first mover advantage and were relegated to ‘me too’ status. As a result, the baker’s dozen of ETFs represents less than 1% of PowerShares total AUM, so it is unlikely to impact the bottom line too much, and instead may actually improve it by getting rid of some of the likely loss producing funds (also see PowerShares Slashes Fees on Six ETFs). 

For example, a few on the list, such as PSTL, PMA, PPLK, PTO, PWND, and CVRT, had less than $10 million in assets each and were thus generating meager revenues for the firm. Still, some were relatively unique, the cheaper option in the space, or were solid performers, so it is undoubtedly a loss for investors overall even if they weren’t being taken advantage of for the time being.

If you are currently an investor in any of the aforementioned products, it is worth noting that the final day of trading for the group will be on February 26th, so investors definitely have some time before the shut down takes place. For those who do not sell by February 26th, they will receive a cash payment equal to the NAV of their shares, inclusive of capital gains and dividends by the liquidation date of March 7th, 2013 (read 4 Best New ETFs of 2012).

There are direct competitors to pretty much every one of the above listed ETFs so it shouldn’t be too hard to find a replacement product that offers similar exposure. Still, let us hope that with the end of 2012 in sight that it also marks the conclusion of the record stretch of ETF closures as well.

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