Be careful what you wish for because you might just get it. Those who bought commodity funds last year
looking for non correlation have gotten it with most of those products negative
on the trailing twelve months that have seen equities race to new highs. The products that are also at least two years
old and have less than $5 million in AUM meet the three criteria for inclusion
on the ETFGsm Liquidation Watch List. May’s list has been posted under the
Analytics button and make sure you can see all three pages.
The73 products represent a new high as the ETF industry
consolidates and more funds fall below the $5 million AUM threshold that makes it
difficult for a sponsor to meet the obligations of running a public fund. 26 of the 73 are commodity funds, mostly ETNs
that present distinct risks involving how backwardation or contango affects tracking
error versus their spot markets at the time of liquidation. Not many long equity funds are down
for the past year but some basic materials and emerging market sector funds are. 20 of the 28 equity funds on the list are
inverse products and many are close to or even below $1 million in AUM which
won’t provide much to the sponsors who typically charge less than 1% in
expenses. The 4 fixed income and 7
currency funds tend to have even lower expense ratios and the 8 multi asset
products vary more widely. Their small
size and negative performance casts doubt on the longevity of these funds that
have already had two years to prove themselves.
Larger funds that do not meet all the
criteria also close but these 73 have heightened risks of liquidation. You will notice mostly esoteric products that
have elevated risk ratings so if you dabble in those make sure they are not on
the list. The ETF industry has been
masterful at bringing innovative products to market and there are plenty if
vibrant ones to meet most objectives.
Check the ETFG Scanner
to find what you are looking for but make sure any exchange traded products you
hold are not on the ETFG Liquidation Watch List.
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