A whopping 35 ETFs and ETNs joined ETF Deathwatch this month. However, seven came off the list thanks to improved health, and another 11 exited due to their demise and liquidation. The net increase of 17 products pushes the count to an all-time high of 435.
Despite the 585 lifetime product closures, 25 of which have occurred this year, the quantity of funds in jeopardy of increasing the death toll continues to grow. The primary reason is that all of the major investment categories are covered. New products coming to market tend to target a narrow niche, or they add a small twist to an existing strategy in an effort to be unique. Most of the 35 products joining the list fit into one of these descriptions.
Even though the 331 ETFs on Deathwatch account for 76% of the 435 total, ETNs continue to have the highest representation. There are 204 ETNs listed for trading, and 104 are on Deathwatch. That is more than half. Ten years ago, when ETNs first arrived on the scene, they offered exposure to many market segments that ETFs were avoiding. However, ETF offerings continue to evolve and have been encroaching on territories that were once the domain of ETNs. Today, most successful ETNs target MLPs, VIX futures, leveraged commodity futures, leveraged dividend plays, or they are customized products for specific asset managers. There are only 33 ETNs with asset levels above $100 million.
Actively managed ETFs also have above-average representation with 39 of the 136 (28.7%) actively managed funds finding themselves on Deathwatch. The 145 smart-beta funds on this list equates to 24.4% of that group. Traditional capitalization-weighted index ETFs appear to have the best chance of survival with just 15.8% of them currently in jeopardy. Combined, the 331 ETFs in these three ETF segments says that one in every five (20%) ETFs is on Deathwatch.
The average asset level of products on ETF Deathwatch increased from $6.2 million to $6.6 million, and the quantity of products with less than $2 million inched higher from 97 to 98. The average age decreased from 46.6 to 46.4 months, and the number of products more than five years old increased from 138 to 148. The fact that sponsors have continued to subsidize 148 unprofitable funds for more than five years indicates they are either extremely patient or in denial.
ETF Deathwatch is not just about closure risk. Liquidity risk should be a primary concern if you are considering any of these funds. On the last day of March, 277 ETFs posted zero volume, and 23 went the entire month without a single trade. Being lucky enough to get your purchase order filled within a reasonable bid/ask spread is one thing. Finding a buyer when you are ready to sell can be quite another.
Here is the Complete List of 435 ETFs and ETNs on ETF Deathwatch for April 2016 compiled using the objective ETF Deathwatch Criteria.
The 35 ETFs and ETNs added to ETF Deathwatch for April
- Cambria Value and Momentum (VAMO)
- DB Agriculture Double Long ETN (DAG)
- Direxion Daily Cyber Security & IT Bear 2x (HAKD)
- Direxion Daily Cyber Security & IT Bull 2x (HAKK)
- Direxion Daily Pharmaceutical & Medical Bear 2x (PILS)
- Direxion Daily Pharmaceutical & Medical Bull 2x (PILL)
- Direxion S&P 500 Volatility Response (VSPY)
- EGShares EM Core ex-China (XCEM)
- First Trust China AlphaDEX (FCA)
- First Trust Strategic Income (FDIV)
- First Trust Taiwan AlphaDEX (FTW)
- FlexShares Credit-Scored US Long Corp Bond (LKOR)
- FlexShares US Quality Large Cap (QLC)
- iPath S&P 500 Dynamic VIX ETN (XVZ)
- IQ Hedge Macro Tracker (MCRO)
- IQ Leaders GTAA Tracker (QGTA)
- iShares Currency Hedged International High Yield Bond (HHYX)
- iShares MSCI Saudi Arabia Capped (KSA)
- John Hancock Multifactor Consumer Discretionary (JHMC)
- John Hancock Multifactor Financials (JHMF)
- John Hancock Multifactor Mid Cap (JHMM)
- John Hancock Multifactor Technology (JHMT)
- KraneShares Bosera MSCI China A (KBA)
- ProShares Hedged FTSE Japan (HGJP)
- ProShares MSCI Europe Dividend Growers (EUDV)
- ProShares S&P 500 Ex-Financials (SPXN)
- ProShares S&P 500 Ex-Health Care (SPXV)
- ProShares S&P 500 Ex-Technology (SPXT)
- PureFunds ISE Mobile Payments (IPAY)
- Recon Capital DAX Germany (DAX)
- Renaissance IPO (IPO)
- SPDR MSCI International Dividend Currency Hedged (HDWX)
- SPDR MSCI International Real Estate Currency Hedged (HREX)
- WisdomTree Global Natural Resources (GNAT)
- WisdomTree Middle East Dividend (GULF)
The 7 ETPs removed from ETF Deathwatch due to improved health:
- AdvisorShares Madrona International (FWDI)
- AdvisorShares WCM/BNY Mellon Focused Growth ADR (AADR)
- ALPS Emerging Sector Dividend Dogs (EDOG)
- iPath Pure Beta Crude Oil ETN (OLEM)
- ProShares S&P MidCap 400 Dividend Aristocrats (REGL)
- ProShares Short Basic Materials (SBM)
- ValueShares International Quantitative Value (IVAL)
The 11 ETFs removed from ETF Deathwatch due to delisting:
- ETFS Physical White Metal Basket Shares (WITE)
- Recon Capital FTSE 100 (UK)
- PowerShares China A-Share (CHNA)
- PowerShares Fundamental Emerging Markets Local Debt (PFEM)
- PowerShares KBW Insurance (KBWI)
- Direxion Value Line Conservative Equity (VLLV)
- Direxion Value Line Mid- and Large-Cap High Dividend (VLML)
- Direxion Value Line Small- and Mid-Cap High Dividend (VLSM)
- ALPS Sector Leaders (SLDR)
- ALPS Sector Low Volatility (SLOW)
- ALPS STOXX Europe 600 (STXX)
Disclosure: Author has no positions in any of the securities mentioned and no positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) is received from, or on behalf of, any of the companies or ETF sponsors mentioned.