A popular ETFGsm tool is our monthly Liquidation Watch List that alerts you to products with a higher likelihood of closing. Advisors have found a scan of the list before recommending a product to clients is a worthwhile step in their diligence process and managers like to consult it to avoid getting stuck in a fund that authorized participants are abandoning. You can find April’s list under the Analytics button and we are pleased to announce, also at WealthManagement.com.
It is compiled each month by screening for three criteria that raise the risk of closure. We begin by looking only at funds open for a minimum of two years as most sponsors will give a new product at least that amount of time to prove itself. After two years, a fund that has failed to acquire a minimum of $5 million under management becomes eligible for the list. The third criteria is having negative performance for the trailing twelve month period, as sponsors know investors are less likely to allocate to a loser. This month’s list highlights 59 exchange traded products that meet all three criteria which is a bump up from recent months. There are plenty of the typical leveraged and inverse ETNs based on niche markets, but there are a few more plain vanilla ETFs tracking sectors of emerging markets like Argentina, Brazil and China.
Financial advisors know that an ETF closure can be a disruptive event and don’t want their clients subjected to the wild swings in tracking error that can occur. Financial advisors also know that WealthManagement.com is the leading source for the news and information they need to stay abreast of their industry which is why we are so excited to be contributing a monthly column on this topic. You can read our inaugural article at this link. The ETFGsm Liquidation Watch List is but one of ETF Global’s many tools that financial professionals have come to rely on and is posted on the publicly accessible part of www.etfg.com. Thanks for checking it out there or at WealthManagement.com.