ETF Shakeups: Three Small Cap Funds To Close, VT To Get Small Cap Extension (TWON, HKK, RSUN, EWT, QAI, VT)
Michael Johnston: The universe of U.S.-listed ETFs has expanded at a record pace in 2011, with more than 300 new products beginning to trade. This year has also seen some contraction, as a number of different issuers have shuttered products that failed to generate interest from investors. IndexIQ is the latest to pare its lineup, as the company has announced it will close three of its international equity ETFs before the end of the year. The ETFs to be closed are:
- IQ Taiwan Small Cap ETF (NYSEARCA:TWON)
- IQ Hong Kong Small Cap ETF (NYSEARCA:HKK)
- IQ Japan Mid Cap ETF (NYSEARCA:RSUN)
[For updates on closing ETFs and analysis of new ETFs, sign up for the free ETFdb newsletter]
The three ETFs have combined assets of only about $5 million, which represents only a small fraction of the company’s total. None of the three was around for very long; TWON debuted in May 2010, but struggled to build a meaningful base of assets. The iShares MSCI Taiwan Index Fund (NYSEARCA:EWT), which consists primarily of large cap stocks, has about $2.2 billion in AUM. Both HKK and RSUN debuted in the middle of this year, which means that they will close down after only about six months on the market. The closure of these products will leave a void, as each was the only option for the combination of market cap and economy covered [try our Free ETF Screener].
The final day of trading will be December 23, and shareholders remaining on December 30 will get a cash distribution. According to the company, costs of closing the funds will be paid by IndexIQ. After the three ETFs are shuttered, the IndexIQ lineup will consist of a dozen ETFs, led by the IQ Hedge Multi-Strategy Tracker ETF (NYSEARCA:QAI). Even with the end of the trio, 2011 will be a year of net growth for IndexIQ, as the company has launched a total of six ETFs on the year. The four that will remain, CROP, IOIL, ROOF, and EMER, have about $50 million in aggregate assets.
VT Gets A Makeover
Just as three targeted small cap ETFs are shutting down, one of the broadest and most popular international equity ETFs is extending its portfolio further into the small cap space [see Small Cap ETFdb Portfolio ]. According to a press release from FTSE, the FTSE Global All Cap Index will now serve as the target benchmark for Vanguard’s Total World Stock ETF (NYSEARCA:VT). Previously, VT had been linked to the FTSE All World Index.
The shift will result in a greater allocation to mid cap and small cap stocks in VT, which will cover approximately four dozen different economies, both developed and emerging:
|Index||Large Caps||Mid Caps||Small Caps|
|FTSE Global All Cap Index (New)||73%||15%||12%|
|FTSE All World Index (Old)||83%||17%||0%|
|Source: FTSE press release|
VT currently has just under $1 billion in assets, and trades more than 200,000 shares daily. Index reconstitutions or changes can sometimes result in tax events, since certain securities must be sold by the fund manager. Vanguard had previously estimated that VT would make zero capital gains distributions in 2011, similar to most of its equity products.
Written By Michael Johnston From ETF Database Disclosure: No positions at time of writing.
ETF Database is committed to giving our audience, consisting of both active traders and buy-and-hold investors, information that, to our knowledge, is truthful and non-biased. [For more ETF insights, sign up for our free ETF newsletter or try a free seven day trial of ETFdb Pro.]