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ETF Deathwatch for December 2014: A Zombie Milestone

The ETF Deathwatch membership roll contains four fewer products this month. Ten new names joined the list, and fourteen came off. Ten of the removals were due to improved health, while the other four ceased operations in November. The overall count now stands at 327, consisting of 226 ETFs and 101 ETNs.

Zombie ETFs achieved a major milestone in November. The iPath Short Enhanced MSCI Emerging Markets Index ETN (EMSA), long the poster child of ETF Deathwatch, has now gone more than two years without a single trade. Barclays launched the EMSA ETN in November 2010 and was criticized for its inability to describe the product’s use of leverage. EMSA then proceeded to join ETF Deathwatch in June 2011, the first month it became eligible.

Trading in EMSA was sporadic at best. As the calendar rolled over to 2012, activity dwindled further. It saw zero volume on about half the days in January, then it dried up completely for all of February and March. Transactions took place on only one day in April, two days in May, and two days in June. That was it until November 9, 2012 when EMSA recorded its last trade – 100 shares at $81.61.

Now, more than two years later, we are still awaiting its next trade. The quote screen is very telling. I’m currently looking at a bid price of $40.44 and an ask of $121.30, for a spread of $80.86. According to the iPath website, EMSA has a current value of $77.91 and about $4.4 million in assets. I fail to comprehend why a product like this is allowed to remain listed. So, why is it still listed? Possibly because the 3.30% expense ratio means that Barclays takes in about $145,000 per year on a dead product.

EMSA is possibly the most egregious example of a zombie ETP, but it is not alone. There were 13 ETPs that went the entire month of November without a trade. On the last day of the month, 265 products posted zero volume. Nearly 16% of all listed ETPs did not trade that day. The true danger of owning products on this list is not knowing if any buyers will show up when you want to sell your shares.

One of the oldest ETFs on Deathwatch escaped this month. BLDRS Europe 100 ADR (ADRU) is more than 144 months (12 years) old and had enough increase in trading activity the past three months to finally come off. However, the average age of products on the list still increased from 46.2 to 46.6 months, and 95 are now more than five years in age. The average asset size is $6.6 million, up from $6.5 million a month ago, and 59 have asset levels of less than $2 million.

Here is the Complete List of 327 Products on ETF Deathwatch for December 2014 compiled using the objective ETF Deathwatch Criteria.

The 10 ETPs added to ETF Deathwatch for December:

  1. Claymore CEF Index GS Connect ETN (GCE)
  2. Deutsche X-trackers Solactive Investment Grade Subordinated Debt (SUBD)
  3. Direxion Daily 20+ Year Treasury Bear 1x (TYBS)
  4. First Trust Managed Municipal (FMB)
  5. IQ Canada Small Cap (CNDA)
  6. iShares iBonds Dec 2016 Corporate Term (IBDF)
  7. iShares iBonds Dec 2018 Corporate Term (IBDH)
  8. iShares MSCI Emerging Markets Value (EVAL)
  9. WisdomTree Commodity Currency Strategy (CCX)
  10. WisdomTree Europe Dividend Growth (EUDG)

The 10 ETPs removed from ETF Deathwatch due to improved health:

  1. BLDRS Europe 100 ADR (ADRU)
  2. EGShares India Consumer (INCO)
  3. ETRACS CMCI Silver TR ETN (USV)
  4. iPath Pure Beta Cocoa ETN (CHOC)
  5. PowerShares DB 3x Long USD Index Futures ETN (UUPT)
  6. ProShares Ultra MSCI Brazil Capped (UBR)
  7. ProShares UltraShort MSCI EAFE (EFU)
  8. SPDR Russell 1000 Low Volatility (LGLV)
  9. VelocityShares 3x Long Crude ETN (UWTI)
  10. WisdomTree BofA ML High Yield Bond Negative Duration (HYND)

The 4 ETPs removed from ETF Deathwatch due to delisting:

  1. VelocityShares Emerging Asia DR ETF (ASDR)
  2. VelocityShares Emerging Markets DR ETF (EMDR)
  3. VelocityShares Russia DR ETF (RUDR)
  4. Barclays ETN+ S&P 500 3x Long B ETN (BXUB)

ETF Deathwatch Archives

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.