Eric Dutram: Global X, the New York-based ETF issuer best known for its innovative products in the emerging market and mining spaces, announced that it would be joining the recent rash of ETF closures with a few funds of its own. The company revealed that it would be reducing its ETF lineup by four funds, bringing the company’s total number of products down to 31.
The ETFs that will be shut down include one mining ETF, the Aluminum ETF (NYSEARCA:ALUM), and the only remaining Auto ETF (NYSEARCA:VROM). Beyond that, it will also include Global X’s two Nasdaq-focused products the Nasdaq 500 ETF (NASDAQ:QQQV) and the Nasdaq 400 Mid Cap Fund (NASDAQ:QQQM).
Combined, these four weren’t exactly very popular and were likely money losers for the company as just under $10 million was invested among the four. Still, the loss of the group certainly reduces investor options in a number of market segments, although clearly these weren’t the most important to many in the investing world (see More ETF Closures: ETRACS to Shutter VIX Lineup).
Particularly, the lack of interest in the Auto ETF segment was somewhat surprising, while I cannot say the loss of QQQV was that unexpected. After all, QQQV has a similar holdings profile, at least in the top holdings, to the ultra-popular QQQ, which was obviously a tough battle for Global X.
Beyond these two, it is a little strange that QQQM never took off, although mid-cap products are generally overlooked by investors across the board, no matter what the segment is. Lastly, aluminum isn’t exactly the ‘sexiest’ of the industrial metals, so interest in an aluminum focused product was probably always going to pale in comparison to copper and other more precious metals as well.
Investors still have a little bit of time left in the products though, as the funds will stop trading on October 18th and be completely liquidated on October 26th, according to Index Universe. On that date, those investors still holding shares will receive a cash payment equal to the NAV while Global X will pay for all the costs associated with the closure (read Scottrade Abandons ETF Lineup, Closing FocusShares).
It should also be noted that Global X is by no means in trouble despite this group of closures and some other fund closings at the end of 2011/start of 2012. Instead, Global X appears ready to throw many ideas against the investment community in order to see what sticks and what doesn’t.
After all, the company still has a number of pretty popular products including several targeting other mining segments, as well as a number of dividend areas as well. Beyond this, Global X also has a pretty full product pipeline including proposed ETFs targeting a number of often overlooked emerging markets, and even a few small cap-centric ETFs too, suggesting that this move isn’t that big of a deal for the firm overall (see ETF Shocker: Russell to Close 25 Funds).
Still, the number of ETF closures so far this year is quite high compared to last year, implying that some much needed contraction is being seen in the ETF world. However, the industry is still doing just fine, as assets are now above $1.3 trillion, while over 140 new funds have hit the market just since the start of 2012.
So while the loss of some more innovative products from Global X is somewhat of a downer, the broader ETF space still seems to be going strong and is poised to reach the key $1.5 trillion AUM mark before 2012 is over, even if a few more closures do take place.
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