Russell Investments is liquidating all but one of its ETFs
after nearly a year in operation amid relatively low trading
The 25 passively managed ETFs tracked indexes that screened
stocks for volatility, momentum, various types of growth,
price-to-earnings ratios and dividends.
"While the innovation behind these new, next-generation ETF
products received substantial interest in general, the market for
them is still in its early days," Russell said in a
They returned anywhere from -0.3% year to date (Russell
Developed ex-U.S. Low Beta ETF (
) to 13.5% (Russell 2000 High Momentum ETF (
). By contrast the S&P 500 returned 14.4% year to date.
The smallest one in the batch,Russell Small Cap High Dividend
Yield ETF (
), had merely $2.52 million in assets. The largest one,Russell
1000 Low Volatility ETF (
), had nearly $70 million. Together they had gathered about $310
million in assets under management after nine to 15 months of
The ETFs will close to new investments Oct. 9 and be fully
liquidated by Oct. 24.
The one ETF spared from the chopping block,Russell Equity ETF
), is a very thinly traded, actively managed fund of ETFs with
$4.2 million in assets. It charges a 0.51% annual management fee,
which is low compared with 1% and more charged by most other
actively managed ETFs. It currently holds 11 ETFs that track
developed and emerging markets.
It's up 11.07% this year and 17.21% in the past 12 months vs.
7.79% and 10.02% for the MSCI EAFE index of developed foreign
The number of actual and announced ETF closures so far this
year total 71, far surpassing the 38 for all of 2011, notes Ron
Rowland, founder of InvestWithAnEdge.com and Capital Cities Asset
Management in Austin, Texas.
Scottrade closed all of its 15 FocusShares ETFs Aug. 17. The
same day, IndexIQ closedIQ South Korea Small-Cap ETF (SKOR) .
Direxion announced this month that it's shutting down nine
triple-leveraged ETFs as of Sept. 5. Global X and Guggenheim both
closed eight ETFs in February.
"The closings tend to come in waves," Rowland said. "One of my
theories is that firms prefer to not have these types of negative
actions stand out, and closing them under the cover of multiple
closings helps to make it less unique."
If that theory proves true, many more ETFs could close this
year, he added.
"The closures are healthy for the ETF industry as they prune
products and sponsors who aren't succeeding," said Christian
Magoon, CEO of Magoon Capital. "We have seen this trend in mutual
funds over the years and continue to see it in ETFs."