Is Your ETF On DEATHROW?

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May 5, 2009 9:17am ETF BASIC NEWS

deathrowThe number of exchange-traded products on Deathwatch decreased for the second month in a row.  It would be premature to declare that the peak is now behind us, because I would not be surprised to see additional recession-related declines in trading activity for some ETFs in the months ahead.  This month’s list contains 155 names, down from 162 last month and down from the record high of 171 for the March list. The current list consists of 114 ETFs and 41 ETNs that are at least six months old and failed to have an Average Daily Value Traded (ADVT) of at least $100,000 during April.

Elements Ben Graham Large Cap Value ETN (BVL) heads up the list this month with a pathetic 38 shares traded per day – an ADVT of just $242.  Closer inspection reveals that BVL only traded on five separate days in April, and its highest-volume day was just 200 shares.  The two other Elements Ben Graham products are on the list as well.  The second entry on the list is Barclays GEMS Asia 8 ETN (AYT) which only traded one day last month.  A grand total of 400 shares traded hands, all on April 7.

PowerShares has the largest number of products on the list with 37 (30 ETFs, 6 ETNs, and 1 BLDR), or nearly 24% of the list.  PowerShares took a step last Friday to improve their standing by announcing the closure of 19 ETFs.  However, only ten of those funds are on ETF Deathwatch.  That means that after the closures, there will still be 26 PowerShares products on ETF Deathwatch plus one BLDR, which is now sponsored by PowerShares.

Clearly, more than just trading activity goes into the decision of whether or not to close an ETF.  One potentially better gauge is assets under management (AUM) for the fund.  However, getting AUM data in a timely manner is tough, and then one would need to determine what percentage is “real investor” money versus “seed money” from the sponsor.  Nearly every fund on this list is composed primarily of the original seed money.  I have found that ADVT does a great job of pointing out where the problems are.

Full Story:  http://investwithanedge.com/etf-deathwatch-may-2009



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