ETF Deathwatch For November 2016: Mortality Rate At 25.4%

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Includes: AADR, ADZ, AFTY, DEEF, FIBG, IBUY, WFHY
by: Ron Rowland

After a two-month respite, ETF Deathwatch membership is on the rise again. This month, the list consists of 458 products (365 ETFs and 93 ETNs) that are probably not profitable for their sponsors. Twenty-six ETFs and ETNs joined the list, and a dozen escaped. The escapees consisted of six ETFs with improved health and six that closed their doors. That puts the total of year-to-date closures at 110, easily enough for a new calendar-year record, and it provides continuing evidence that many funds are prone to closure.

The ETF mortality rate is now 25.4%, as 661 of the 2,598 U.S. ETF and ETN launches are no longer with us. With one of every four products closing, survival requires much more than a "build it, and they will come" marketing strategy. In addition, the aggressive pricing by entrenched players makes it all the more difficult for new sponsors to achieve critical mass.

Although actual closures are a concern, investors can circumvent most of the potential problems by following the Five Steps to Avoid Disaster When Your ETF Closes. The biggest problem in my view is the lack of liquidity in these funds and the havoc that can create for unsuspecting retail investors.

Of the 1,937 ETFs and ETNs listed for trading at the end of October, 297 did not trade on the last day of the month. There were 437 that had at least one zero-volume day during October, 32 that went the entire month with zero volume, and four that haven't had a single trade all year. Would you want to sell your shares in that environment?

The DB Agriculture Short ETN (NYSEARCA:ADZ) is an example of what I am talking about. It was launched in 2008, so it is hardly new. It recently went three months (August, September, and October) without any trades. Last week, there was a single trade for 100 shares at $31.24. Today, the highest bid is $16.00 for 700 shares, and the lowest offer is 500 shares at $38.80. Just a "small" $22.80 spread on something with a net asset value of $30.77.

The average asset level of products on ETF Deathwatch held steady at $6.9 million, and the quantity of products with less than $2 million in assets grew from 85 to 88. The average age fell from 48.4 to 48.1 months, and the number of products more than 5 years of age increased from 175 to 177.

Here is the Complete List of 458 ETFs and ETNs on ETF Deathwatch for November 2016 compiled using the objective ETF Deathwatch Criteria.

The 26 ETFs and ETNs added to ETF Deathwatch for November:

  1. Amplify Online Retail (NASDAQ:IBUY)
  2. Credit Suisse FI Enhanced Big Cap Growth ETN (NYSEARCA:FIBG)
  3. CSOP FTSE China A50 (NYSEARCA:AFTY)
  4. Deutsche X-trackers FTSE Emerging Comprehensive Factor (NYSEARCA:DEMG)
  5. Dhando Junoon ETF (NYSEARCA:JUNE)
  6. Direxion Daily Energy Bear 1x (NYSEARCA:ERYY)
  7. Direxion Daily Financial Bear 1x (NYSEARCA:FAZZ)
  8. Direxion Daily Technology Bear 1x (OTC:TECZ)
  9. Guggenheim Large Cap Optimized Diversification (NYSEARCA:OPD)
  10. Janus Small/Mid Cap Growth Alpha ETF (NASDAQ:JSMD)
  11. Janus Velocity Tail Risk Hedged Large Cap (NYSEARCA:TRSK)
  12. JPMorgan Diversified Return Intl Currency Hedged (NYSEARCA:JPIH)
  13. ProShares Ultra Consumer Services (NYSEARCA:UCC)
  14. ProShares Ultra FTSE Europe (NYSEARCA:UPV)
  15. ProShares Ultra Industrials (NYSEARCA:UXI)
  16. ProShares Ultra SmallCap600 (NYSEARCA:SAA)
  17. REX Gold Hedged FTSE Emerging Markets (NYSEARCA:GHE)
  18. REX Gold Hedged S&P 500 (NYSEARCA:GHS)
  19. SPDR EURO STOXX 50 Currency Hedged (NYSEARCA:HFEZ)
  20. Sprott Buzz Social Media Insights (NYSEARCA:BUZ)
  21. WisdomTree Emerging Markets Dividend (BATS:DVEM)
  22. WisdomTree Fundamental U.S. Corporate Bond (BATS:WFIG)
  23. WisdomTree Fundamental U.S. HY Corp Bond (BATS:WFHY)
  24. WisdomTree Fundamental U.S. S-T Corp Bond (BATS:SFIG)
  25. WisdomTree Fundamental U.S. S-T HY Bond (BATS:SFHY)
  26. WisdomTree International Quality Dividend Gr (BATS:IQDG)

The 6 ETPs removed from ETF Deathwatch due to improved health:

  1. AdvisorShares Dorsey Wright ADR ETF (NYSEARCA:AADR)
  2. Deutsche X-trackers FTSE Dev ex US Comprehensive Factors (NYSE:DEEF)
  3. Deutsche X-trackers Russell 1000 Comprehensive Factors (NYSE:DEUS)
  4. First Trust High Income (NASDAQ:FTHI)
  5. ProShares UltraShort Semiconductors (NYSEARCA:SSG)
  6. Victory CEMP Emerging Market Volatility Weighted (NASDAQ:CEZ)

The 6 ETPs removed from ETF Deathwatch due to delisting:

  1. Direxion Daily FTSE Developed Markets Bull 1.25x (NYSEARCA:LLDM)
  2. Direxion Daily FTSE Emerging Markets Bull 1.25x (NYSEARCA:LLEM)
  3. Direxion S&P 500 Volatility Response (NYSEARCA:VSPY)
  4. VanEck Vectors Gulf States (NYSEARCA:MES)
  5. VanEck Vectors Indonesia Small-Cap (ISXJ)
  6. AdvisorShares EquityPro (NYSEARCA:EPRO)

ETF Deathwatch Archives

Disclosure: Author has no positions in any of the securities mentioned and no positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) is received from, or on behalf of, any of the companies or ETF sponsors mentioned.