Markets

Jefferies To Close 2 ETFs With Few Assets

(Updated with new information throughout.)

Jefferies Asset Management on Dec. 22 is shuttering two commodities-related equity ETFs focused on agriculture and industrial metals, most likely because the two funds have gathered so few assets in their two years of existence.

The two ETFs and their assets, according to data compiled by IndexUniverse, as of Dec. 13 are:

  • Jefferies TR/J CRB Global Agriculture Equity ETF (NYSEArca:CRBA), $8.58 million
  • Jefferies TR/J CRB Global Industrial Metals Equity ETF (NYSEArca:CRBI), $3.18 million

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“The funds’ board of trustees determined that closing and liquidating the funds was in the best interests of the Funds and the Funds’ shareholders,” the ALPS ETF Trust said in a supplement to the funds’ prospectus it filed with the SEC. ALPS markets the funds and manages their administrative details.

The shutterings are the latest this year following a slew of fund closings this past summer, including the shuttering of the Direxion Airline ETF, the Javelin Funds’ JETS Contrarian Opportunities Index Fund and the entire line of ETFs from FaithShares. Both Jefferies funds have been scoring “High” in terms of closure risk in the ETF rating system developed by IndexUniverse’s Analytics unit.

The demise of the Jefferies funds suggests shortcomings in terms of marketing as both were perfectly adequate funds in a pocket of the ETF that isn’t terribly crowded with competitors.

That said, CRBA, the agriculture-focused, has been snowed under by the huge popularity of Van Eck’s Market Vectors Agribusiness ETF (NYSEArca:MOO). The Van Eck ETF had $5.57 billion in assets as of Dec. 13, according to data compiled by IndexUniverse. Jeffries’s CRBA came to market in October 2009, while MOO was launched in August 2007.

In the same vein, the Jefferies metals ETF, CRBI, hasn’t faced a crowded field of competition either. The most successful ETF in that space is arguably the SPDR Metals ' Mining ETF (NYSEArca:XME). XME has gathered $766.5 million in assets since it came to market in June 2006. Jefferies lauched CRBI, like CRBA, in October 2009.

If a study from the business consultancy McKinsey ' Co. study turns out to be on the mark, the pace of ETF shutdowns is likely to accelerate as the competitive landscape in the exchange-traded fund industry grows more intense.

McKinsey said that between 2000 and 2007, just 10 ETFs were shuttered. In the next three years, more than 150 were shut down.

Logistics Of Liquidation

The funds will close to new investors and discontinue trading on Thursday, Dec. 22, according to the regulatory filing.

Arca, the New York Stock Exchange’s electronic trading platform, will halt trading in the ETF shares before the market open on Dec. 23, the filing said.

Liquidation of the ETF will take place on or before Dec. 28, with shareholders of record on that date will receive cash at the net asset value of their shares on the date. That cash will include any capital gains and dividends on the date of liquidation.

While shareholders have no assurance of finding buyers for their shares,

Shareholders can sell their shares of CRBA and CRBI before Dec. 23, incurring a transaction fee from their broker-dealer, according to the filing. They may be able to sell their ETF shares from Dec. 23 to Dec. 28 to certain broker-dealers, though there’s no assurance a market for the shares will exist at that time.

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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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