ConvergEx Group will serve as âtransition managerâ as six
exchange-traded HOLDRs securities become Market Vectors ETFs
sponsored by Van Eck Global, giving the New York-based financial
data and trading firm a crucial role in a transaction that serves
to illustrate how big ETFs are becoming.
ConvergEx said in a press release it will rebalance the six
portfolios, meaning it will be buying and selling stocks on the
open market to shepherd the transitions from HOLDRs to index-based
Van Eck began the exchange offers last month and, unless
extended, they will continue until Dec. 20. The new ETFs will have
an annual expense ratio of 0.35 percent, which Van Eck said is more
than what the HOLDRs have cost investors.
While itâs not yet clear how many HOLDRs investors plan to
accept the exchange offers, the transfer offering is one more sign
that the ETF juggernaut is gathering steam. As of Dec. 2, investors
had almost $1.072 trillion allocated to various U.S.-listed ETFs.
Inflows into ETFs have outpaced those into any other investment
vehicle as investors become more familiar with the benefits of the
HOLDRs, on the other hand, have had their day. The funds, which
are holding company depositary receipts Merrill Lynch launched in
the late 1990s and early 2000s, are narrowly focused portfolios
that, once created, never changed. They are exchange traded like
ETFs, but that set-and-forget aspect has made them increasingly
irrelevant as the markets have evolved and companies have come and
In its statement, ConvergEx trumpeted its expertise in
portfolio, basket and block execution, stressing the company is
developing what it called âcreative solutionsâ for an expanding
The six HOLDRS together have $3.57 billion in assets, or around
90 percent of all 17 of Merrillâs existing HOLDRs.
The six HOLDRs and their assets are:
- Oil Services HOLDRs (NYSEArca:OIH), $2.01 billion
- Semiconductor HOLDRs (NYSEArca:SMH), $565.8 million
- Pharmaceutical HOLDRs (NYSEArca:PPH), $516.9 million
- Biotech HOLDRs (NYSEArca:BBH), $259.0 million
- Retail HOLDRs (NYSEArca:RTH), $142.4 million
- Regional Bank HOLDRs (NYSEArca:RKH), $76.2 million
In a recent blog titled âTaxes And The HOLDRS Demise,â we
weighed the various options HOLDRS have and their consequences,
including selling them, keeping the underlying securities without
the HOLDRS wrappers, or taking Van Eck up on its offers.
Van Eck said that as of Nov. 4, the following percentages of
stocks in each of the HOLDRS will have to be sold to turn them into
Van Eck ETFs:
- OIH, 28 percent
- SMH, 42 percent
- PPH, 53 percent
- BBH, 62 percent
- RTH, 26 percent
- RKH, 77 percent
Merrill has said it plans to shutter the 11 HOLDRs that arenât
part of the Van Eck exchange offers.
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