A Second Death For FocusShares
The FocusShares brand is headed to the grave for a second time. Scottrade will de-list the 15-ETF family after last day of trading on August 17, with full liquidation planned by month-end. I urge shareholders to dispose of any holdings prior to delisting.
The original FocusShares ETFs were launched in 2007 but survived less than a year. Discount broker Scottrade acquired the defunct shell, along with its SEC exemptive relief, in 2010 as a quick path into the ETF business. Morningstar provided indexes and FocusShares came back to life.
As we noted at the time (see FocusShares Rides Again), the new incarnation faced several obstacles to success. They now appear to have been insurmountable. The closure announcement (pdf) blames “current market conditions, the inability of the Funds to attract significant market interest since their inception, and their future viability as well as prospects for growth in the Funds’ assets in the foreseeable future.”
FocusShares may yet rise again with a new host and possibly a new name. The episode is further confirmation that “me-too” ETFs are less viable than ever. Scottrade was essentially giving them away, yet still failed to attract assets. These ETFs had the lowest expense ratios within their categories and commission free trading. Even the Morningstar name did not persuade investors or traders to give them a try. As a result, most have been on ETF Deathwatch and also flagged in the ETF Field Guide for low assets and liquidity concerns.
The 15 FocusShares ETFs to be closed are:
- Focus Morningstar US Market Index ETF (FMU)
- Focus Morningstar Large Cap Index ETF (FLG)
- Focus Morningstar Mid Cap Index ETF (FMM)
- Focus Morningstar Small Cap Index ETF (FOS)
- Focus Morningstar Basic Materials Index ETF (FBM)
- Focus Morningstar Communication Services Index ETF (FCQ)
- Focus Morningstar Consumer Cyclical Index ETF (FCL)
- Focus Morningstar Consumer Defensive Index ETF (FCD)
- Focus Morningstar Energy Index ETF (FEG)
- Focus Morningstar Financial Services Index ETF (FFL)
- Focus Morningstar Health Care Index ETF (FHC)
- Focus Morningstar Industrials Index ETF (FIL)
- Focus Morningstar Real Estate Index ETF (FRL)
- Focus Morningstar Technology Index ETF (FTQ)
- Focus Morningstar Utilities Index ETF (FUI)
Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.