Global X, the New York-based issuer of many international and specialized funds, announced recently that it will close out four of its ETFs that have not attracted assets compared to their other popular funds like the SIL and GXG. October 18 will be the last day of trading for these ETFs:
- Aluminum ETF (ALUM): Even though it was the most heavily-traded ETF of this bunch it was still only traded 2,600 shares a day, while the majority of Global X’s 35 ETFs more than doubling that.
- Auto ETF (VROM): The largest ETF on the chopping block, VROM had only $2.6 million in assets. VROM’s specified interest in the auto industry can also be found in CARZ, a First Trust ETF, which follows the most liquid auto manufacturers around the world.
- NASDAQ 500 ETF Profile (QQQV): This straightforward ETF, like QQQM, is not even a year old and just never came into its own. While no other ETF specifically tracks the NASDAQ 500, ETFs like the PowerShares QQQ, or the equal-weighted QQEW, offer exposure to stocks listed on that tech-heavy exchange.
- NASDAQ 400 Mid Cap ETF (QQQM): The smallest of them all, this ETF only had $1.4 million in assets and fewer than 500 shares were on an average day.
Wave of Closures Continues
After years of significant expansion in the product roster, the second half of 2012 has seen a definite wave of contraction wash over the industry. Dozens of ETFs have been shuttered over the past few months, including the entire FocusShares product suite and substantially all of the Russell lineup. Other ETF issuers have announced strategic trimmings of their products.
Though each ETF is unique, the “breakeven point” from the perspective of the issuer is generally thought to be between $25 million and $50 million. Funds that fail to reach that critical mass are essentially run at an operating loss, costing the sponsor money to keep open. With hundreds of additional ETFs falling below those thresholds, it is possible that further contraction in the industry is ahead in the remainder of 2012 and into 2013.
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Disclosure: No positions at time of writing.