BlackRock, the world's largest ETF provider, plans to liquidate
the iShares Diversified Alternatives Trust (NYSEArca:ALT), a $57.6
million actively managed exchange-traded fund that has been on the
market since October 2009, saying it doesn't think the security is
resonating with investors.
The active fund invests in a mix of equity, fixed-income and
currency futures and forwards, and attempts to earn a steady return
with limited volatility. It's been successful at that goal, eking
out an annualized gain of 0.87 percent since inception, with
relatively low volatility and extremely low correlations to the
Those academically sexy attributes have not translated into
asset flows, however, as ALT has seen steady outflows for the past
two years. ALT's assets peaked at $141 million in 2011, but have
declined in a nearly straight line since then. In the past two
years, investors have pulled $58 million out of the fund.
iShares apparently didn't see that trend turning around anytime
"iShares continually reviews its product range to ensure it
meets the evolving needs of our clients," said Patrick Dunne, head
of Global Markets and Investments for BlackRock. "Based on the
review and client feedback, it appears this product has a limited
role in today's investment portfolios, and we have seen little
The fund will continue to trade normally for about the next
month, at which point it will liquidate its positions and return
proceeds to shareholders.
Change Of Tune For iShares?
ALT's closure may come as a shock to some investors, as iShares
has a reputation for not closing
. The firm has not closed an ETF since 2002, when it shuttered
three funds-two sector products that covered the chemical and
Internet industries, respectively, and one fund linked to the
S&P/TSE 60, an index of Canadian stocks. At the time, iShares
said that the funds were either too narrow or duplicative of other
products within the iShares lineup.
That's not the case with ALT, which is iShares' only
"alternatives" ETF, and which provides a broad range of exposure.
In ALT's case, iShares simply didn't see the product resonating
with investors over the longer term.
Interestingly, the closest competitor to ALT-the WisdomTree
Managed Futures Strategy ETF (NYSEArca:WDTI)-has been quite
successful. The WisdomTree ETF has about $126 million in assets,
and has pulled in nearly $100 million in net inflows over the past
Those inflows into WDTI are all the more impressive when one
considers that the fund has lost an annualized 7.75 percent per
year since its inception in January 2011. WDTI is even down over
the past year by nearly 4 percent, during which time iShares' ALT
has delivered strong returns.
Still, the two products are quite different, with WDTI tracking
a well-known index-the Diversified Trends Indicator-and fitting
neatly into the well-established "managed futures" bucket.
ALT was something different-an actively managed product with
extremely low volatility-and that, apparently, didn't resonate with
investors long term.
Investors may now wonder if iShares will close more funds in the
future. The firm declined to comment, saying only, as did Dunne in
his prepared statement, that it continually reviews its product
It's worth noting that ALT is not iShares' smallest ETF, not by
a long shot. The firm's 281-fund ETF lineup includes 75 funds with
fewer assets than ALT, including 32 with less than $10 million in
assets under management.
Indeed, ALT's $57 million asset haul makes it the third-largest
ETF ever to announce plans to close. The only funds to be shuttered
with higher assets were closed due to merger-related issues.
Guggenheim closed down the $153 million Claymore/Delta Global
Shipping Index ETF (NYSEArca:SEA) in 2010, when it was acquiring
Guggenheim, and was unable to muster enough votes from SEA's
shareholders to approve a change of manager. SEA later relaunched
and now has $32.3 million in assets.
Also, Merrill Lynch shut the roughly $100 million Telecom HOLDRS
that traded under the symbol "TTH" following Van Eck's 2011
acquisition of some of the HOLDRS products.
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