BlackRock's plans to liquidate the iShares Diversified
Alternatives Trust (NYSEArca:ALT) are on track, with the suspension
of the issue set for May 29 and its ultimate liquidation set for
June 4, according to an electronic communique from the New York
Stock Exchange, where ALT has its primary listing.
ALT, a $43.3 million actively managed exchange-traded fund that
has been on the market since October 2009, isn't resonating with
investors, according to iShares. The shuttering is the first for
the world's biggest ETF firm since 2002.
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 $84 million out of it, and they've
yanked about $15 million out since iShares announced ALT's closing
a month ago.
ALT's closure may come as a shock to some investors, as iShares
has a reputation for not closing
. The firm hasn't 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 $82 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 that it
continually reviews its product lineup.
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.
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