This Bearish 3X India ETF Will Liquidate In September (INDZ)
Christian Magoon: The only India ETF that seeks to gain as Indian markets fall will close to investors and be liquidated according to a news release this past Friday. Direxion, one of the largest inverse and leveraged ETF providers, announced that the Direxion Daily India Bear 3X ETF (NYSEARCA:INDZ) will liquidate September 12, 2012. The decision to close this ETF and 8 others was based on the funds inability to “attract sufficient investment assets.” According to the news release from Direxion the funds that will liquidate include:
“The Trust will close the following Funds: Direxion Daily Agribusiness Bull 3X Shares (COWL), Direxion Daily Agribusiness Bear 3X Shares (COWS), Direxion Daily Basic Materials Bear 3X Shares (MATS), Direxion Daily BRIC Bull 3X Shares (BRIL), Direxion Daily BRIC Bear 3X Shares (BRIS), Direxion Daily Healthcare Bear 3X Shares (SICK), Direxion Daily India Bear 3X Shares (INDZ), Direxion Daily Latin America Bear 3X Shares (LHB) and Direxion Daily Retail Bear 3X Shares (RETS).”
Direxion had offered the only two leveraged and inverse India ETFs available, INDZ and INDL, the Direxion Daily India Bull 3x Shares. Both launched in March of 2010 however INDL received the lion’s share of assets and trading volume. With over $20 million in assets and average share volume of 43,000, INDL appears a viable fund for now. Here’s a comparison of INDL versus INDZ from the IndiaETFs.com India ETF list.
Leveraged and inverse India ETF products INDL and INDZ attracted different levels of interest.
Leveraged and inverse India ETF products are particularly different than traditional ETFs as they are designed to deliver the daily leveraged or inverse return of the index being tracked. Thus these products are designed to be held for one day or less. Taking a look at the performance of the two India ETFs from Direxion, INDZ has vastly outperformed INDL over the last year. However, this performance assumes that an investor is buying and selling the 3x ETF each business day. Take a look at the numbers below from the IndiaETFs.comperformance grid.
India ETF INDZ outperformed INDL over the last year but is closing due to lack of investor interest.
The small amount of investors in INDZ are likely to be best served by liquidating any positions by the close of business September 5th as afterward the ETF will cease to trade on the open market. It will then begin to sell its underlying holdings in the open market in order to deliver proceeds to existing shareholders by September 12th.
Christian Magoon is Publisher of GoldETFs.biz and IndiaETFs.com. He is also CEO of Magoon Capital, a strategic consultant firm to asset managers. Christian Magoon is an ETF insider, having launched over 40 ETFs in the United States to date. A widely recognized thought leader on finance and market issues, Christian regularly contributes to many financial media outlets. Prior to forming Magoon Capital in 2010, Christian was President of Claymore Securities (now Guggenheim Investments), where he built one of the fastest growing and most innovative ETF businesses in the country, gathering more than $3 billion in AUM in three years. He launched more than 40 ETFs, introducing many “firsts” to the U.S. market, including the first Frontier Markets, Sector Rotation, Solar Energy, Timber, BRIC and suite of China focused ETFs. Christian consistently provides his industry insights and knowledge as a commentator in the U.S. media speaking publicly on macro investment issues and ETF related topics. Follow him on Twitter @ChristianMagoon. In 2008, he was named by Institutional Investor News as one of the five people to watch in the U.S. ETF marketplace. In 2011, Financial Planning magazine dubbed Christian an “ETF Pioneer.”