iShares Closing Actively Managed Diversified Alternatives ETF (ALT)

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April 29, 2013 12:00pm NYSE:ALT

isharesRon Rowland: BlackRock announced (pdf) it would be closing the iShares Diversified Alternatives Trust (NYSEARCA:ALT) due to client feedback on the ETF’s limited application in portfolios and lack of long-term demand for the product.  The last day of trading will be May 28,

with liquidation and final distributions targeted for completion by June 4, 2013.

Launched in November 2009, ALT was the first ETF from iShares that sought to provide alpha instead of just beta exposure.  The actively managed ETF has stated objectives of 6%-8% annualized standard deviation and a Sharpe ratio of 0.50 to 0.75, which translates to annual returns of 4%-7%.  Since inception, ALT has generated just a +0.9% annual return at 6.7% standard deviation, for about a 0.12 Sharpe ratio.

The closure is somewhat surprising as ALT is not a zombie ETF, and there are at least 39 other iShares in worse shape on ETF Deathwatch.  It is the ninth largest of the 44 ETFs in the Alternative Strategies category of the ETF Field Guide.  With $57 million under management, it is has more assets than typical ETF closures.  It is far from being the largest closure though, as PowerShares DB Crude Oil Double Long ETN (former ticker DXO) held more than $600 million when it announced plans to liquidate.

Active management does not appear to be a contributing factor in the decision to close ALT, as more than 29% of Alternative Strategy ETFs fit the actively managed description.  However, it is the only ETF in the category to issue K-1 statements instead of 1099s, which could be a factor.  As always, we recommend selling your shares prior to delisting to avoid any unwelcome surprises.

This article is brought to you courtesy of Ron Rowland from Invest With an Edge.

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