Guggenheim Liquidating Nine ETFs

| February 23, 2013 | 0 Comments

closedGuggenheim Investments announced yesterday it will liquidate nine ETFs in March.  The nine funds are collectively worth $144 million and represent about 1% of the firm’s nearly $14 billion in total ETF assets.

Here’s a list of the ETFs getting the axe… 

  • Guggenheim ABC High Dividend ETF (ABCS)
  • Guggenheim MSCI EAFE Equal Weight ETF (EWEF)
  • Guggenheim S&P MidCap 400 Equal Weight ETF (EWMD)
  • Guggenheim S&P SmallCap 600 Equal Weight ETF (EWSM)
  • Guggenheim Airline ETF (FAA)
  • Guggenheim 2X S&P 500 ETF (RSU)
  • Guggenheim Inverse 2X S&P 500 ETF (RSW)
  • Wilshire 5000 Total Market ETF (WFVK)
  • Wilshire 4500 Completion ETF (WXSP)

Guggenheim’s shutting the funds down so it can “focus resources on products that have demonstrated the most marketplace demand.”  In other words, these funds failed to attract enough assets to merit continuing operations.

But just because Guggenheim’s closing a few funds doesn’t mean they’re giving up on ETFs.

Managing Director, William Belden, stressed the company “remains committed to the ETF business…” and explained that the closures are merely “a natural and necessary part of the process to ensure we are meeting our clients’ needs.”

He certainly has a point in saying fund closures are a “natural” part of the ETF business. 

Last year, over 100 different ETFs were shut down by a number of different providers.  But that’s to be expected considering the number of ETFs has exploded from 800 in 2010 to over 1,400 today.

So, what’s the next step?

The last day of trading for these ETFs is expected to be Friday, March 15, 2013, with the liquidation happening by March 22nd.  Remaining shareholders at the end of the day on March 21st will receive that day’s closing net asset value (NAV) for their shares. 

The liquidation proceeds, including any accrued capital gains and dividends, will be distributed on or about the following day.  Investors will not be charged any transaction fees by the ETFs for the distribution of the final fund proceeds.

The big question is what should you do if you own one or more of these funds?

If you sell now, you might get less for your shares than the final NAV.  You see, several of these funds are now trading at discounts to their NAVs.

Clearly, a number of investors jumped ship as soon as the liquidation news came out.

However, if you hold on to your shares through the final day of trading, you take the risk that your fund’s NAV declines between now and then.  If it does, you’ll probably get less for your shares at liquidation than you could right now.

Unfortunately, there’s no one correct answer for every investor or a blanket answer for all of these funds.

My advice is to see if your fund’s trading at a premium or discount to its NAV. 

If it’s trading at a premium or at NAV, you may want to sell now and move your money into a new opportunity.  No sense waiting around for the liquidation and incurring potential delays in getting your money back.

On the other hand, if your fund’s trading at a discount to NAV, you have a tougher decision to make. 

If it’s a wide discount, you may want to hold on to your shares to see if you’ll get more money in the liquidation.  If it’s a small discount, you may want to eat the difference so you can move your money into a better opportunity today.

Whatever you decide to do, keep this in mind…

You’re better off making a rational decision based on what’s best for you.  Don’t get scared by the headline and sell your shares in a panic.  Remember, the securities in your ETF won’t trade any differently just because they’re held in an ETF that is closing.   

Profitably Yours,

Robert Morris

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Category: ETFs, What's Going On?

About the Author ()

Wall Street veteran and ETF specialist Robert Morris helped created ETF Trading Research in order to help investors get the most out of their ETF investments. Before creating ETR, Robert worked for a number of prestigious Wall Street firms such as Salomon Smith Barney, UBS, Hyperion Financial and Charles Schwab.

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