ConvergEx To Run Van Eck HOLDRs Transition

ConvergEx Group will serve as “transition manager” 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 ETFs.

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 it’s 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 ETF structure.

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 gone.

In its statement, ConvergEx trumpeted its expertise in portfolio, basket and block execution, stressing the company is developing what it called “creative solutions” for an expanding ETF industry.

The six HOLDRS together have $3.57 billion in assets, or around 90 percent of all 17 of Merrill’s 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 “Taxes And The HOLDRS Demise,” 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 aren’t part of the Van Eck exchange offers.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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