139 Names on ETF Deathwatch

The number of ETFs on Deathwatch continues to grow as we enter 2009. My current list contains 139 names: 97 ETFs and 42 ETNs. The list includes any ETF/ETN that is at least six months old and had an Average Daily Value Traded of less than $100,000 in December.

Exchange Trade Notes are suffering from concerns of default risk. The Lehman Brothers (LEHMQ.PK) bankruptcy, which resulted in the demise of three ETNs, is causing investors to hesitate before throwing money into these products. Unless ETN sponsors to take steps to calm investor fears, their representation on the list is likely to grow in the coming months.

NETS PSI 20 Index Fund (LIS) tops the list for the second month in a row. It is an ETF designed to track the performance of the PSI 20 Index of Lisbon, Portugal. Total volume for the month of December was 900 shares. Although this represents a huge percentage increase from the 211 shares traded in November, it wasn’t enough to improve the fund’s ranking.

NETS has 15 ETFs that track single-country stock exchanges. Unfortunately, 12 of them are on deathwatch today, and the other three just barely escaped. In most cases, these are unique and potentially great products. However, investors don’t seem to know they exist. If they are to have a chance at surviving, NETS needs to step up their marketing efforts.

The SPA MarketGrader products are in huge trouble. They have a total of six ETFs and all six of them are on deathwatch. Once again, these are potentially good products, but marketing efforts have failed to attract any attention.

ETRACS is another group in dire straights with nine of their ten products on the list this month. ETRACS also has to overcome ETN credit concerns since all ten of their offerings are ETNs. The Elements offerings are in a similar situation. All their products are ETNs also, and ten are on deathwatch this month.

XShares continues to struggle. They shut down all 26 of their HealthShares and Adelante Real Estate Shares in 2008. The have four remaining products under the TDAX brand, three of which are on our list. Claymore also saw a large number of ETF closures in 2008 yet has another 19 on the list this month.

The reason for so many products being on the list is simple - too many arrived too quickly for the market to absorb. For the most part, these products are suffering from poor design; they are suffering from investor overload and marketing failures. There will be a day in the future when 1,000 ETFs are not enough. For now, 800 is proving to be far too many. There will be further casualties.

Note: The dubious distinction of being included on the list below is reserved for U.S. listed ETFs and ETNs that have been available for at least six months, and their Average Daily Value Traded (ADVT) for the most recent calendar month was less than $100,000 per day.

click to enlarge images

ETF Deathwatch January 2009

Comments

[A. Nony Mouse:]

Coming soon HAP, which is not 6 months old yet, and probably a good idea when it looked like we were facing hyper-inflation and not deflation/depression.

Jan 04 02:17 PM

[genex:]

For the uniformed: What happens when these etfs or etns die?

Jan 04 03:42 PM

[Mike Havrilla:]

AirShares (ASO) Carbon Fund seems destined for the list even though it just started trading 12/15/08:
www.etfinnovators.com/...

iPath Global Carbon ETN (GRN) has been trading about six months now with little in the way of net assets or trading volume and I see it made the list

Jan 04 07:40 PM

[Kyle Waller:]

genex,

When an ETF is closed, there is a process over a month or two of the fund liquidating its shares. At that time the ETF does not have to maintain its objective since it is in the process of liquidation. At the closing time, the ETF will liquidate all its shares and the an investor holding the ETF will receive the NAV for the ETF at that time.

An ETN is similar to an unsecured debt obligation, so an investor holding an ETN is open to credit risk and is guaranteed nothing.

Jan 04 09:57 PM

[NOWHEREMAN:]

Kyle: where can I get more info on ETNs?

Or do I have to look through the Prospectus of each?

Thank you.

Jan 05 08:58 AM

[notsosmart:]

never trusted or owned either one.all wall st is now gambling or ponzi.invest in good co's(hope the ceo is not too much of a liar) that pay a reasonable dividend.stay away from phony rated paper you dont understand.thats the best you can hope for.

Jan 05 03:37 PM