Ron Rowland

ETF Deathwatch: April 2009

Excellent points. I have stated in the past that there is much more than volume involved in determining which ETFs survive and which ones don't. As you suggest, the true measure is probably assets under management. However, getting AUM data in a timely manner is tough, and then one would need to determine how much of that is seed money versus real investor money.

Nearly every fund on this list has its assets composed primarily of the original seed money. I have found that looking at ADVT does a great job of pointing out where the problems are. Are there better methods? Probably, but how much work does it take to implement those methods, and is the extra amount of information learned worth the extra effort?

As far as a creation/redemption ratio I can tell you that the creation/redemption ratio for most of the above is #DIV/0! in Excel speak. There are no shares being created or redeemed, so it is a divide by zero problem.

Look again at the ADVT versus the size of the creation unit. Many of these ETFs would need many many months of activity to equal the demand needed for a single creation unit. There is no ADVT for these ETFs, hence no demand, hence no new shares being created, hence no creation/redemption ratio.

Someone looking using the above list can draw similar conclusions that you have - any iShares ETFs on the list are less likey to be closed than the other brands. I don't expect the HOLDRS to liquidate anytime soon either. Their expenses were covered years ago and they are just sitting back collecting the fees. However, I think they should be on this list to warn potential buyers that there are liquidity concerns with those products. The risk of liquidation might be lower than with other products, but you still have to wonder if someone is going to take the other side of your trade when it comes time for you to sell.

What’s the Best U.S. Total Market ETF? Style? Sector?

You better check your data. This ETF only traded on six days in January. Its last trade of 2008 took place on Dec 8, 2008. That is not a typo. If you are calculating performance based on last trade of 2008, then you are basing it on stale data - very stale.

Additionally, the last trade of January took place on 1/23 - again very stale data.

It appears that your "January" return is actually the return between the 12/8 trade of $5.75 and the 1/23 trade of $6.12.

I normally do not put ETFs on deathwatch while they are less than six months old, but I may make an exception for this one.