It has been a pretty rough year for emerging markets across the globe. A stronger dollar, concerns over a shift in Fed policies, and current account issues have all helped to drag down at least a few emerging markets over the past few months.
This has made it pretty difficult for emerging market ETFs to accumulate assets in the time period, as investors seek the safety of the U.S. market, or the rebounding fortunes in Europe instead. Thus, it shouldn’t be too surprising to note that EGShares, the only ETF issuer entirely focused on emerging markets, has announced the closure of 12 of its ETFs (see all the Emerging Market ETFs here).
Closures in Focus
The company will be closing down its entire lineup of GEMS ETFs which offered sector specific exposure to emerging markets. In addition, they will also be shuttering their emerging markets metals and mining ETF to round out the group. The full list of the funds is as follows:
- GEMS Composite (AGEM)
- Financials GEMS (FGEM)
- Consumer Goods GEMS (GGEM)
- Health Care GEMS (HGEM)
- Industrials GEMS (IGEM)
- Basic Materials GEMS (LGEM)
- Energy GEMS (OGEM)
- Technology GEMS (QGEM)
- Telecom GEMS (TGEM)
- Utilities GEMS (UGEM)
- Consumer Services GEMS (VGEM)
- Emerging Markets Metals & Mining ETF (EMT)
The group represents about 4% of the company’s total assets under management, though no single ETF had more than $12 in assets. The two leaders were easily AGEM and EMT, though these had, respectively, $10 million and $8 million under management (also read EGShares Launches Emerging Market Dividend Growth ETF).
Trading for this group will be suspended prior to the start of business on October 7th 2013, while those that do not sell before this date will receive cash equal to the amount of the net asset value of their shares.
It is also worth noting that each fund’s NAV will reflect the costs of closing the fund, while each fund may pay out a final clean-up distribution in order to give investors of record their accrued capital gains and income, as of the close of trading on October 4th.
It has clearly been a tough environment for emerging markets lately, but EGShares is forging ahead nonetheless. The company has instead been focused on emerging market dividend securities lately, having launched a number of targeted products in this space over the past few months (see EGShares Launches New Emerging Market Dividend ETF).
Furthermore, according to an EGShares press release, the company has actually added about $400 million in new assets this year, compared to a $12.5 billion loss in assets for the broad emerging market fund industry. So while the EGShares closure news is clearly a setback, it appears as if the company is still going strong and is instead looking to align its fund lineup with investor demand, specifically by targeting yield.
Beyond this, it is worth noting that the company’s targeted Consumer Titans ETF (ECON) remains extremely popular with investors. This fund now has just over $1 billion in AUM, and remains one of the top choices for investors seeking targeted exposure to the dynamic consumer market in developing nations around the world (read Access the $30 Trillion Emerging Consumer Market with These ETFs).
The huge closure will, however, cut down the number of ETFs offered by EGShares in half, bringing the total offering down to 12. So clearly EGShares is going to be running a bit leaner for the time being, and the company is undoubtedly hoping that investors show a bit more interest in their new dividend ETFs than they have shown in the relatively unpopular GEMS sector funds over the past few years.
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