iShares, the biggest issuer of ETFs and PIMCO, the world’s largest bond fund manager, have planned to shut down a total of 22 funds from their lineups. The closures reflect a lack of interest in these products in an investment world with more than 1,700 US listed ETFs.
Among the funds slated to be closed, iShares plans to close 18 ETFs that have a combined AUM of $520 million, including 10 target-date funds. All these funds are quite unpopular, as all have AUMs of under $100 million with just a few among them having assets over $50 million.
Among the 10 target-date funds, iShares Target Date 2010 ETF , iShares Target Date 2045 ETF , iShares Target Date 2050 ETF (TZY), iShares Target Date 2015 ETF (TZE) and iShares Target Date 2035 ETF are some of the least popular funds with under $36 million of asset base.
The proposed closure of these target-date bonds comes on the heels of iShares’ two recent debuts in the same space. iShares Bond Dec 2016 Corporate Term ETF (IBDF) and iShares Bond Dec 2018 Corporate Term ETF (IBDH) which were launched a couple of months back (read: 2 New Target Date Bond ETFs Debut from iShares).
BlackRock – the parent company of iShares – said that “the decision was based on ongoing reviews, client feedback and limited investor interest in the funds.”
Some of the other iShares funds to be closed include MSCI Far East Financials ETF (FEFN), MSCI Emerging Markets Financials ETF (EMFN), MSCI Emerging Markets Materials ETF (EMMT), Retail Real Estate Capped ETF (RTL) and Industrial/Office Real Estate Capped ETF (FNIO). The funds will be completely liquidated by Oct 21.
Pimco Germany Bond ETF , Pimco Canada Bond ETF , Pimco Australia Bond ETF and Pimco Build America Bonds Strategy are the four ETFs to be closed by PIMCO. The funds have a combined AUM of $68 million and will be liquidated by October 1.
With these closures, the total number of closures so far this year boils down to 45, as per ETF.com. This is far less than the 70 closures we had last year.
The closures clearly highlight the survival of the fittest funds. Nonetheless, even following the 18-fund closure, iShares will still have more than 300 U.S. listed ETFs under its umbrella, with iShares Core S&P 500 ETF (IVV) being the most popular among them with an asset base of $60.1 billion.
On the other hand, PIMCO still manages some of the largest actively managed ETFs including the $3.8 billion Enhanced Short Maturity ETF (MINT) and the $3.5 billion Total Return ETF (BOND) (read: Inside the 2 New Active Bond ETFs from PIMCO).
In fact, PIMCO revealed its intention of launching three new ETFs soon – Pimco Fundamental IndexPlus AR Active ETF (USFI), Pimco International Fundamental IndexPlus AR Strategy Active ETF (IFI) and the Pimco Foreign Bond Active ETF (U.S. Dollar Hedged) (FBH).
Thus, closures can be viewed as a healthy process to eliminate the unpopular and unwanted funds. Though the fund closures are not expected to have a significant impact on iShares as it still has quite a number of successful funds with a huge asset base, they might after all have some impact on PIMCO (read: Two Actively Managed ETFs worth the Cost).
The 4 ETF closures will reduce the ETF offerings by PIMCO by 20%. In spite of the popularity of MINT and BOND, PIMCO is going to be running a bit leaner for the time being. The company is undoubtedly hoping that investors show a bit more interest when it brings its new products to the market and that these find a bigger following than its recently closed funds.
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