GlobalShares To Exit U.S. ETF Industry

by on September 28, 2010 | ETFs Mentioned:

Old Mutual Global Index Trackers (OMGxT), a South African-based asset manager, announced last week that it plans to shut down five ETFs listed in the U.S. under the GlobalShares brand, ending a brief experiment that failed to attract significant interest. Trading in the five ETFs will be suspended prior to the market opening on October 6, and shareholders of record as of October 8 will receive the net asset values of their shares. The ETFs to be closed down include:

  • FTSE Emerging Markets Fund (GSR)
  • FTSE All-Cap Asia Pacific ex-Japan Fund (GSZ)
  • FTSE All-World ex-U.S. Fund (GSO)
  • FTSE Developed Countries ex-U.S. Fund (GSD)
  • FTSE All World Fund (GSW)

“The U.S. ETF market was a new distribution channel for our well-established South African indexation business,” said OMGxT CEO Tendai Musikavanhu. “Given the structure of the U.S. ETF market and prolonged volatile market, we’ve decided that it’s unlikely our products will gain sufficient market share in the United States.”

Old Mutual’s stay in the ETF industry was relatively short. GSR debuted in late 2009, and the fund issuer used some unique strategies to generate interest. The expense ratio on GSR was temporarily reduced to 0% for a few months, an ETF industry first. In May, the company slashed the expense ratio on GSR to 0.25%, hoping to lure in cost-conscious investors. Although the move made GSR the cheapest option in the Emerging Markets Equities ETFdb Category, investor interest never really picked up and the fund found itself in the shadow of EEM and VWO.

Three of the Old Mutual products (GSZ, GSO, and GSW) launched in April, meaning that they will meet their end only about six months after inception. Both GSW and GSO competed directly with well-established Vanguard ETFs and represented the same underlying indexes as their Vanguard counterparts [see our database of ETF indexes].

List Grows Longer

With the shuttering of the five GlobalShares funds, the number of closed ETFs for 2010 will reach 36. Most recently, Javelin announced that it was pulling the plug on its ETF compliant with Islamic law, citing a lack of investor interest. Old Mutual becomes the third issuer to leave the ETF industry in the last year; last December MacroShares bowed out of its paired housing market products, while Geary announced this month that it was terminating the Oklahoma and Texas ETFs.

Disclosure: No positions at time of writing, photo is courtesy of Lars Haefner.