Claymore Fund Closings Not Good for ETF Industry

Holy fund closings. We've had the odd shuttering of a fund in the past but there went 11. Matt Hougan has written a nice little article on it, and he talked to Christian Magoon about it. Could this be the opening of the gate for many future similar closings? Goodness knows traditional funds have been doing it in large numbers for many years (hence the dreaded survivorship bias in many fund studies). Funds are often incubated and then merged or shuttered depending on their asset and returns performance.

I believe I'm write that this is the largest ETF fund closing in history - I think that Deutsche Bank's 8 Country Baskets (caskets if you will) would come in second. Greg Newton mentions them in his fun review of DBC when that was launched:

If I was an investor in one of those funds, I would not be pleased. Obviously an unexpected liquidation for someone looking to be long is not an ideal scenario. But by the looks of things, Claymore can probably call up the specialists and have them get their accountants ready to prepare for any tax issues as they cash in their seed money.

So it concerns me seeing this, but I can't say it's unexpected, and above all (and this is the critical part) I can't say it's anything unusual. If I see a big media story on the catastrophe of ETFs closing (something I could imagine), I'll just add it to my list of ways ETFs are misunderstood relative to funds.

All that said, closings are NOT ideal, and it's NOT good I think for the industry to get the reputation, if it gets it, of throwing anything out there, hoping for the best and closing whatever doesn't get assets. This is very much along the lines of Matt's 5 Golden Rules for ETFs. Existing products have built a great name for the industry and should protect it, even if they can't police it.

Written by Jim Wiandt

Comments

[Reynold:]

You may "believe you're write," but your being right is not at all convincing. You are defending the indefensible. The "industry" has slung hundreds of funds out there, and only a few of them are "great products". Many are just niche garbage. Die, ETFs, die!

2008 Feb 02 08:58 PM

[User 86999:]

Your last paragraph is kind of confused. You seem to recognize the ill, that vendors are cluttering the space without much thinking and then pulling away what doesn't work, but at the same time, you seem to wish that they keep pretending that everything is all right, by no pulling the plug on what is not right. Strange! At least, the Canadians have enough sense to accept the mistake, rectify it, and move on.

2008 Feb 03 08:33 PM