Guggenheim To Shutter Eight ETFs

by on February 23, 2012 | ETFs Mentioned:

Guggenheim announced this week that its board had approved the shuttering of eight exchange-traded products, including six ETFs and two members of the CurrencyShares suite of grantor trusts that offer exposure to exchange rate fluctuations. The move comes as Guggenheim is integrating the Rydex lineup of ETFs and moving to sharpen the focus of its lineup. “Guggenheim Investments remains committed to the U.S. ETP business,” said William Belden, head of product development. “As a leader in the market, we are dedicated to providing high quality investment solutions for our clients.”

Five of the ETFs being closed down were originally part of the Guggenheim ETF roster, joined by one equal weight Rydex ETF. March 23 will be the last day of trading for the following ETFs:

  • Russian Ruble Trust  (FXRU)
  • Mexican Peso Trust (FXM)
  • EW Euro Pacific LDRs (EEN)
  • International Small Cap LDRs (XGC)
  • Ocean Tomo Growth Index ETF (OTR)
  • Ocean Tomo Patent ETF (OTP)
  • Sector Rotation ETF (XRO)
  • MSCI All Country World Equal Weight ETF (EWAC)
Ticker AUM Inception
FXRU $5.0 November 2008
FXM $39.1 June 2006
EEN $2.7 March 2007
XGC $5.6 April 2007
OTR $14.2 April 2007
OTP $24.3 December 2006
XRO $15.3 September 2006
EWAC $3.7 January 2011

As the ETF industry continues to expand rapidly, product closures have become a regular occurrence. Until ETFs reach a certain “critical mass” of assets, the revenues generated through management fees are not sufficient to cover the associated expenses, meaning that they are being run at a loss. The Guggenheim ETPs being shuttered in March combined to represent only about $100 million in aggregate assets, a minor portion of the company’s total lineup.

Handling ETF Closures

ETF closures are generally very orderly procedures; the products highlighted above will continue to track their index and continue to trade regularly for the next month or so. Eventually, the underlying securities will be sold and converted to cash, which will be distributed to shareholders who elect to continue to maintain their positions in these ETFs.

Investors are advised to avoid “panic selling” on news of an ETF closure, as putting in a market order to liquidate shares can potentially result in a less-than-optimal execution. Investors essentially have two options: selling the shares of the closing ETFs in the next month, or receiving a cash distribution once Guggenheim liquidates the funds [see How To Deal With ETF Closures].

Disclosure: No positions at time of writing.