Thursday, July 18, 2013

There have been so many new names scoring and ranking well recently that we neglected to mention the July ETFG® Liquidation Watch List has been posted, as it usually is in the early days of each month.  This is where we summarize all exchange traded products that have existed for at least two years, have less than $5 million in AUM and have registered negative performance for the trailing twelve months.  Those are the criteria that we see as raising the risk that a sponsor will pull the plug on an underperforming ETP.  Different sponsors will have different reasons for termination so we like to say that inclusion on the list does not guarantee closure nor does exclusion guarantee longevity.

It has become a popular tool in advisors’ due diligence process, especially those who dabble in the more esoteric offerings out there.  July’s list contains a record 78 ETPs which is more than 5% of the population so it is becoming more important to make sure the ones you are considering will stick around for your timeframe.  There are 33 equity products which include 9 additions this month, mostly focused on emerging markets and basic materials sectors such as gold miners.  A few of them are top 100 Quant rankers.  The 26 commodity products from last month’s list all remain and are joined by another iPath ETN tracking lead.  The multi asset and currency categories each have the same 7 names from June’s list.  Despite the bond market rout in June, only 4 fixed income products appear and they are all inverse.  Most bond funds are above the AUM threshold and still have positive performance for the past year.

We also cover the list and general liquidation issues each month in a column at that can be seen here.  One issue we have covered is the consolidation occurring in the ETP marketplace that has produced record closure rates.  Sponsors have been introducing more esoteric products and closing underperforming ones at a quicker pace. The ETFG® Liquidation Watch List helps you avoid the various difficulties that can attend a liquidation, so if an ETP you like is among the threatened 5%, check the ETFG® Scanner for other products with similar exposure but better durability.  As always send any questions to and thanks for being part of ETF Global®.

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