ETF Deathwatch for June 2013: FactorShares In Jeopardy

ETF Deathwatch membership rolls increase by eight for June, with fourteen new additions and six departures.  New members consist of six ETFs and eight ETNs, while all six products leaving are ETFs.  As June gets underway, the ETF Deathwatch membership count stands at 342, consisting of 229 ETFs and 113 ETNs.

All new product introductions receive a six-month grace period from ETF Deathwatch.  Nine products debuted in November 2012, making this the first month they are eligible.  Seven of these nine are joining the list, a grim reminder of the difficulty new launches face in this environment. 

Four of the ETFs moving directly out of the grace period and on to the Deathwatch list are ETNs bearing the RBS Rogers Enhanced Commodity name.  The other three are ETFs with the new PureFunds brand from FactorShares.  Five previously existing FactorShares ETFs are long-time members of ETF Deathwatch, meaning that 100% of their product lineup is now part of the membership list. 

FactorShares underwent a transformation about a year ago when Gencap Ventures acquired it, with the intent of becoming a turnkey ETF launch platform.  However, its existing lineup is in jeopardy and attracting new assets will be a difficult task.  This is because ETFs carrying the FactorShares name have ridiculously high total expense ratios, ranging from a low of 9.68% for FactorShares 2X: Gold Bull/S&P500 Bear (FSG) to a high of 33.70% for FactorShares 2X: S&P500 Bull/TBond Bear (FSE).  It continues to amaze me that regulators allow such products to exist, but I guess as long as this travesty is disclosed deep on page 25 of the prospectus (page 35 of the pdf), then it is okay.

Seven products went the entire month of May without any trades.  Both iPath Short Enhanced MSCI EAFE ETN (MFSA) and iPath Short Enhanced MSCI Emerging Markets (EMSA) have yet to post their first trade of 2013  A total of 145 ETPs had zero volume on the last day of the month.  In other words, on any given day nearly 10% of the listed ETPs do not trade.  This is not “low” liquidity, this is “no” liquidity.

Complete List of 342 Products on ETF Deathwatch for June 2013 

The 14 ETPs added to ETF Deathwatch for June:

1. Barclays ETN+ S&P 500 2x Long C ETN (BXUC)
2. ETRACS 1x Monthly Short Alerian MLP ETN (MLPS)
3. Guggenheim Enhanced Core Bond (GIY)
4. iPath US Treasury Flattener ETN (FLAT)
5. PowerShares DB Commodity Double Long ETN (DYY)
6. PureFunds ISE Diamonds/Gemstone (GEMS)
7. PureFunds ISE Junior Silver (SILJ)
8. PureFunds ISE Mining Service (MSXX)
9. QuantSharesU.S.Market Neutral Anti-Beta (BTAL)
10. RBSRogersEnhanced Agriculture ETN (RGRA)
11. RBSRogersEnhanced Energy ETN (RGRE)
12. RBSRogersEnhanced Industrial Metals ETN (RGRI)
13. RBSRogersEnhanced Precious Metals ETN (RGRP)
14. SPDR S&P Software & Services (XSW)

The 6 ETPs removed from ETF Deathwatch due to improved health:

1. Direxion All Cap Insider Sentiment (KNOW)
2. iShares MSCI Far East Financials Sector (FEFN)
3. iShares MSCI World (URTH)
4. Market VectorsIndonesiaSmall-Cap (IDXJ)
5. SPDR S&P International Technology (IPK)
6. WisdomTree Large Cap Value (EZY)

Additional Data/Resources:

• Five Steps to Avoid Disaster When Your ETF Closes 
• ETF Deathwatch Criteria (objective criteria used to generate list)
• ETF Deathwatch Archives (past monthly issues)

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.

-  Print This Page

AdvisorShares Rockledge SectorSAM ETF (SSAM) Closing This Week

AdvisorShares recently announced the impending closure of the AdvisorShares Rockledge SectorSAM ETF (SSAM).  The ETF’s last day of trading will be this Friday (June 14, 2013) with liquidation and final distribution occurring around June 21.  “After consulting with the Rockledge team, we determined that it was in the best interest of shareholders to close SSAM due to its performance and associated costs,” said Noah Hamman, CEO of AdvisorShares.

AdvisorShares Rockledge SectorSAM ETF (SSAM) began trading January 12, 2012 as an actively managed fund-of-funds ETF hoping to “generate stable and consistent annual returns under all market conditions” using a market neutral approach.  The portfolio manager, Rockledge Advisors, pursued its Sector Scoring and Allocation Methodology (“SectorSAM”) of buying sector ETFs it forecasted to outperform the S&P 500 while selling short an equal dollar amount of sector ETFs it believed would underperform.  The fund used the nine Sector SPDR ETFs from State Street.

Since inception, the SSAM ETF produced an annualized return of -4.2% versus +16.2% for the S&P 500.  As of June 9, its web page showed a gross expense ratio of 11.04%.  However, the Advisor had agreed to cap expenses at 1.50% excluding short selling expenses and acquired fund fees.  Therefore, the resulting net expense ratio of 3.11% required the Advisor to waive or reimburse 7.93% of expenses.

A 7.93% expense reimbursement equates to $93,974 per year on assets of $1,185,049.  AdvisorShares was very forthcoming when it said that one of the reasons for closing SSAM was the “associated costs.”  The simple fact is ETFs need assets to be profitable.  In the case of SSAM, even an extremely high net expense ratio of 3.11% resulted in the Advisor having to pay about $7,800 a month to keep it open. 

ETFs with more typical expense ratios of about 0.50% have an even larger economic hurdle to overcome.  Eventually, the profit drain will force many other products on ETF Deathwatch to close.  I encourage any remaining shareholders in SSAM to sell your shares prior to the delisting using a limit order.

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.

-  Print This Page

ETF Stats for May 2013 – Net Annual Increase of Only 4 ETPs

Nine new ETFs and two new ETNs came to market in May.  The month also saw one ETF closure.  The net increase of 10 places the current exchange traded product count at 1,469 as of the end of May, consisting of 1,259 ETFs and 210 ETNs.

For the past 12 months, the net increase in the quantity of listed products is only four, which equates to an annual growth rate of just 0.3%.  A month ago, the 12-month change was two, and for March, the net increase was just one.  The last time the annual net increase was is the single digits for three months running was in April 2000, more than 13 years ago.  However, the product count went from 30 to 38 in the 12 months ending April 2000, which was a very healthy 26.7% annual growth rate.

Asset growth paints a more positive picture.  Although assets grew by only 0.4% in May to $1.495 trillion, they are up an impressive 31.6% from the $1.136 trillion level of a year ago.  Successful products have been able to generate substantial inflows.  Even with the modest gains of May, the number of funds above the $10 billion threshold climbed from 31 to 34.  These 34 ETFs are just 2.3% of the products available, but they control 53.9% of the assets.

Trading activity declined 3.6% for the month with a total of $1.38 trillion of ETFs and ETNs changing hands.  Only 0.5% of the products averaged more than $1 billion per day in trading, yet these seven ETFs accounted for more than half (53.2%) of all trading activity.  Talk about a lopsided market.  The monthly turnover rate (total dollar volume divided by assets under management) came in at 0.92.

May 2013 Month End	ETFs	ETNs	Total
Currently Listed U.S.	1,259	210	1,469
Listed as of 12/31/2012	1,239	206	1,445
New Introductions for Month	9	2	11
Delistings/Closures for Month	1	0	1
Net Change for Month	+8	+2	+10
New Introductions 6 Months	58	6	64
New Introductions YTD	48	6	54
Delistings/Closures YTD	28	2	30
Net Change YTD	+20	+4	+24
Actively-Managed Listings	62	n/a	62
Assets Under Mgmt ($ billion)	$1,477	$18.3	$1,495
% Change in Assets for Month	+0.4%	+1.3%	+0.4%
Qty AUM > $10 Billion	34	0	34
Qty AUM > $1 Billion	201	3	204
Qty AUM > $100 Million	617	24	641
% with AUM > $100 Million	49.0%	11.4%	43.6%
Monthly $ Volume ($ billion)	$1,349	$29.6	$1,379
% Change in Monthly $ Volume	-2.9%	-27.1%	-3.6%
Avg Daily $ Volume > $1 Billion	7	0	7
Avg Daily $ Volume > $100 Million	64	2	66
Avg Daily $ Volume > $10 Million	256	11	267

Data sources:  Daily prices and volume of individual ETPs from Norgate Premium Data.  Fund counts and all other information compiled by Invest With An Edge.

New products launched in May (sorted by launch date):

1. Direxion Daily Brazil Bear 3x Shares (BRZS) [BRZS overview]
2. Direxion Daily South Korea Bear 3x Shares (KORZ) [KORZ overview]
3. First Trust Senior Loan ETF (FTSL) [FTSL overview]
4. PowerShares Fundamental Emerging Markets Local Debt Portfolio (PFEM) [PFEM overview]
5. Cambria Shareholder Yield ETF (SYLD) [product review: Redefining Yield With Cambria Shareholder Yield ETF]
6. Barclays ETN+ FI Enhanced Global High Yield ETN (FIGY) [FIGY prospectus]
7. WisdomTree U.S. Dividend Growth Fund (DGRW) [DGRW overview]
8. Barclays ETN+ FI Enhanced Europe 50 ETN (FEEU) [FEEU prospectus]
9. ProShares High Yield – Interest Rate Hedged (HYHG) [HYHG overview]
10. SPDR Barclays 1-10 Year TIPS ETF (TIPX) [TIPX overview]
11. SPDR S&P Global Dividend ETF (WDIV) [WDIV overview]

Product closures/delistings in May (sorted by delisting date):

1. iShares Diversified Alternatives Trust (ALT) [iShares Closing Actively Managed Diversified Alternatives ETF]

Product changes in May:

1. SPDR FTSE/Macquarie Infrastructure 100 ETF (GII) became the SPDR S&P Global Infrastructure ETF (GII) effective May 1.
2. Effective May 1, two iShares ETFs dropped “index” from their names, becoming iShares MSCI Frontier 100 Fund (FM) and iShares MSCI Kokusai Fund (TOK).  They will continue to be passively managed index funds.
3. Six ETFs from Global X (GLDX, URA, JUNR, ARGT, CHIM, and GGGG) underwent reverse splits effective May 16.
4. Vanguard MSCI EAFE ETF (VEA) went from a MSCI to FTSE index and changed its name to Vanguard FTSE Developed Markets (VEA) effective May 29.
5. db X-trackers MSCI Canada Hedged Equity Fund (DBCN) underwent an extreme makeover, becoming the db X-trackers MSCI Germany Hedged Equity Fund (DBGR) effective May 31.

Announced Product Changes for Coming Months:

1. First Trust Strategic Value Index Fund (FDV) will undergo an extreme makeover, becoming the First Trust Capital Strength ETF (FTCS) effective June 3.
2. Vanguard Total Stock Market ETF (VTI) will change its underlying MSCI index to the CRSP US Total Market Index effective June 3.
3. UBS will close seven ETRACS ETNs (BLND, LSKY, PTD, EIPO, EIPL, SSDD, and SSDL) with the last day of trading being June 5.  [UBS Calls 7 ETRACS ETNs For Redemption]
4. Seven ProShares (UGE, UPRO, UMDD, UWC, RXL, UCC, and URTY) will undergo 2-for-1 share splits effective June 10.
5. Eight ProShares (DUG, FINZ, TTT, SJF, EFU, KOLD, VIXY, and UVXY) will undergo reverse splits and receive new CUSIP numbers effective June 10.
6. Four iShares ETFs (IBCD, IBCC, IBCD, and IBCE) will have new CUSIP numbers effective June 10.
7. Guggenheim Yuan Bond ETF (RMB) will close and liquidate.  Its last day of trading will be June 14.  [Guggenheim Yuan Bond ETF (RMB) To Close]
8. Effective June 21, the Sustainable North American Oil Sands ETF (SNDS) will undergo an extreme makeover, becoming the YieldShares High Income ETF (YYY) with a different investment objective.

Previous monthly ETF statistics reports are available here.

Disclosure covering writer, editor, publisher, and affiliates: 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.

-  Print This Page

UBS Calls 7 ETRACS ETNs For Redemption

Wednesday, June 5, 2013 will be the last day of trading for seven exchange traded notes (“ETNs”) issued by UBS under the ETRACS brand.  The final redemption value will be determined at the close of business the following day (June 6).  To avoid any closure related surprises, we believe it is in the best interest of note holders to dispose of their shares on the open market prior to the delisting and redemption.

The seven closing ETNs are:

1. ETRACS DJ-UBS Commodity Index 2-4-6 Blended Futures ETN (BLND)
2. ETRACS Monthly 2x Leveraged ISE Cloud Computing Total Return ETN (LSKY)
3. ETRACS Inverse UBS Bloomberg CMCI Platinum Excess Return ETN (PTD)
4. ETRACS Next Generation Internet ETN (EIPO)
5. ETRACS Monthly 2x Leveraged Next Generation Internet ETN (EIPL)
6. ETRACS ISE Solid State Drive Index ETN (SSDD)
7. ETRACS Monthly 2x Leveraged ISE Solid State Drive Index ETN (SSDL)

Assets in the closing products total less than $60 million and range from a low of $3 million for PTD to a high of just over $16 million for LSKY.  All but one of the closing products is less than two years old.  BLND is the youngest, introduced just 13 months ago, while PTD is the oldest and has been around more than five years.  All seven ETNs are on ETF Deathwatch.

The criteria used by UBS in deciding which ETNs to close was not given.  However, some products appeared to be spared for strategic reasons.  For example, three products with less than $5 million each in assets escaped closure at this time, presumably because they are part of a lineup of basic commodity ETNs.  They are ETRACS CMCI Energy TR ETN (UBN), ETRACS CMCI Industrial Metals TR ETN (UBM), and ETRACS CMCI Livestock TR ETN (UBC). 

All previous UBS ETRACS closures were VIX related ETNs.  Additional information about the seven new closures can be found in the UBS press release.

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.

-  Print This Page

Read More Commentary Here>>>>