First ETF Closures of 2012
Global X previously announced (pdf) that Thursday, February 16, 2012 will be the last day of trading for eight Global X ETFs. I encourage all shareholders to sell their shares prior to delisting to avoid the ETF liquidation process. Due to light volumes and wide bid/ask spreads on the affected ETFs, it is imperative to use a limit order to ensure a fair price on the trade.
Global X Management has determined it can not continue to conduct the business and operations of the funds in an economically efficient manner because of the low levels of assets. As such, the Board of Trustees concluded it would be in the best interests of the eight funds and their shareholders to liquidate and terminate the following ETFs:
- Global X Farming (BARN)
- Global X Fishing Industry (FISN)
- Global X Food (EATX)
- Global X Mexico Small-Cap (MEXS)
- Global X Oil Equities (XOIL)
- Global X Russell Emerging Markets Growth (EMGX)
- Global X Russell Emerging Markets Value (EMVX)
- Global X Waste Management (WSTE)
The closure of Global X Farming (BARN), Global X Fishing Industry (FISN), and Global Food (EATX) leaves Global X Fertilizer/Potash ETF (SOIL) as the only survivor from the original 4 Fs of the Food Supply Chain lineup. The chain has been broken.
Global X Mexico Small-Cap (MEXS) was the second non-leveraged Mexico ETF and the first to focus on small cap stocks. The departure of MEXS creates a void in western hemisphere equity ETF coverage.
Global X Oil Equities (XOIL) had an objective to be a good proxy for spot oil prices since many futures-based products failed as a result of contango. However, the original XOIL index backtest showed only a 0.63 correlation to crude oil over a five-year period. Perhaps it was doomed from the start by establishing unrealistic expectations.
Dividing emerging markets into growth and value segments seemed like a good idea at the time. It’s only been a year since EMGX and EMVX appeared, but Global X is now resigned to the fact that maybe it was not such a good idea or was a good idea just ahead of its time. I put myself in the latter camp. The product development team at BlackRock seems to agree, as iShares MSCI Emerging Markets Growth (EGRW) and iShares MSCI Emerging Markets Value (EVAL) launched last week.
I questioned the viability of Global X Waste Management (WSTE) at the time of its launch. In comparing it to Market Vectors Environmental Services ETF (EVX), I noted “it is not clear that WSTE brings anything to the table to justify its higher expense ratio. Another question is whether this segment has enough investor interest to support another product.”
The first eight ETF closures of 2012 will soon be behind us, although I anticipate the year-end tally to exceed the 38 closures of 2011.
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.