QuantShares, the firm that first took steps to enter the ETF
market in January 2010, is shutting down three of its original
lineup of seven market-neutral equities ETFs in early November due
to their inability to attract assets.
In a filing submitted to U.S. regulators, the ETF market
newcomer said that trading in the three funds would stop on Nov. 2
and the funds would be completely liquidated by Nov. 19. The funds
and their current assets are:
- QuantShares U.S. Market Neutral High Beta Fund
(NYSEArca:BTAH), $4.8 million
- QuantShares U.S. Market Neutral Anti-Momentum Fund
(NYSEArca:NOMO), $3.2 million
- QuantShares U.S. Market Neutral Quality Fund (NYSEArca:QLT),
Altogether, the firm has some $50.4 million in total assets
under management, according to data compiled by IndexUniverse.
QuantShares first started rolling out its roster of
market-neutral ETFs a year ago, looking to tap into a growing
category of so-called enhanced-beta ETFs that seek to build on the
more-straightforward market exposure of capitalization-weighted
indexes that select securities solely based on their market
The firm had to climb two major mountains right off the bat, the
first being that alternative indexation is still a relatively new
trend in the world of indexing and there's a lot of investor
education that has to go into that. Secondly, there's growing
sentiment-and evidence-that there's little room for newcomers in an
ETF market that has 90 percent of its assets tied to 10 percent of
The three closures brings to 92 the number of ETF shutterings so
far this year. That's more than three times as many as the 30 that
shut in 2011 and almost twice as many as 2010's 49 closings. Still,
despite the accelerated pace of fund shutdowns, total U.S.-listed
assets of $1.3 trillion are still quite close to an all-time
Smart Beta Challenges
Russell Investments is perhaps the most recent example of a firm
that failed to get traction marketing what it called 'intelligent
beta' ETFs, and ended up shuttering all 25 funds this month, with
the exception of one actively managed ETF.
Indeed, QuantShares said today in a press release that it had
looked for its strategies to resonate with institutional and retail
investors alike, but lower-than-expected demand and trading volume
was causing it to trim the offering lineup.
That's not to say QuantShares is throwing in the towel.
The firm will continue to market its other four existing ETFs,
and also last month put six factor-based ETFs into registration
with the Securities and Exchange Commission that use smart indexes
to tap into everything from dividends to beta to momentum.
Between Nov. 2 and Nov. 19, the funds will liquidate their
portfolio assets, the filing said.
Investors still holding on to shares of any of these funds on
liquidation day will receive cash distributions equal to the net
asset value of their shares.
No transaction fees will be incurred in connection with that
distribution, although that payment could be considered a taxable
event, the company said.
The other four QuantShares market-neutral funds will continue to
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