BlackRock’s acquisition of Barclays Global Investors and iShares seemingly went off without a hitch earlier this month. But certain actions required by terms of the deal have proven difficult to wrap up, resulting in a dozen iShares funds now operating under interim investment advisory agreements and potentially closing down.
As a result of the sale to BlackRock, the existing investment advisory agreements for iShares ETFs terminated on December 1, and approval of a new agreement requires shareholder action. According to iShares, investors have voted overwhelmingly to approve new agreements for 167 funds, but have received insufficient participation to do so for 12 ETFs:
- iShares MSCI Brazil Index Fund (EWZ)
- iShares MSCI EMU Index Fund (EZU)
- iShares MSCI Germany Index Fund (EWG)
- iShares MSCI Mexico Investable Market Index Fund (EWW)
- iShares S&P Europe 350 Index Fund (IEV)
- iShares S&P Global 100 Index Fund (IOO)
- iShares S&P Global Consumer Discretionary Sector Index Fund (RXI)
- iShares S&P Global Financials Sector Index Fund (IXG)
- iShares S&P Global Industrial Sector Index Fund (EXI)
- iShares Dow Jones U.S. Medical Devices Index Fund (IHI)
- iShares FTSE China (HK Listed) Index Fund (EWH)
- iShares FTSE/Xinhua China 25 Index Fund (FXI)
The aforementioned funds are all equity ETFs, and range in size of assets from about $80 million (RXI) to more than $11 billion (EWZ). It’s important to note that changes to the agreements haven’t necessarily met opposition from investors, but rather haven’t met minimum participation thresholds required to take such action.
In Danger Of Closing?
According to a letter from iShares (PDF), if sufficient votes aren’t received on the matters at hand, the board of directors will “take such action it deems necessary and in the best interests of…shareholders, including closing and liquidating such Adjourned iShares Fund.
Given that these funds have aggregate assets of almost $30 billion, it’s extremely unlikely that iShares will begin shuttering them if enough votes aren’t cast. But there are certainly costs associated with repeated attempts (and failures) to push through necessary changes, meaning it is in the best interest of anyone owning these ETFs to take action one way or another.
Disclosure: No positions at time of writing.