Bye-Bye Birdie: 5 ETFs Seeing Massive Redemptions
There's no getting around the fact that assets under management for exchanged-traded products are growing. The nearly 1,460 U.S.-listed ETFs and ETNs had over $1.2 trillion in combined AUM at the end of April, according to data from the ETF Industry Association. That's up from $1.1 trillion a year earlier and $846.7 billion in April 2010.
Impressive growth to be sure, but not all ETFs are getting on the action. In fact, some ETFs have seen rapid paces of redemptions in the past year.
Not surprisingly, some of the worst offenders in terms of redemptions are offenders when it comes to performance as well. That stands to reason as redemption of an ETF is akin to selling a stock and when a lot of redemptions occur in a single ETF, it's equivalent to sellers outnumbering buyers in individual stocks. The result is the ETF's price go down.
Along those lines, fund flows data can be instructive, though the caveat is not always 100% accurate. For example, the Market Vectors Gold Miners ETF (NYSE: GDX) ranks among the top-10 ETFs for share creations over the past year. In that time, GDX has lost 21.3%.
When it comes to those funds seeing big redemptions since May 2011, almost all are in the red. Just look at these culprits.
Market Vectors Coal Miners ETF (NYSE: KOL) Investors apparently got the memo that low natural gas prices coupled with the slowing Chinese and Indian economies would not be good news for KOL and its constituents. That much is highlighted by the ETFs 38.5% slide in the past year and the fact that KOL currently rests less than $2 above its 52-week. KOL will start today with $180.4 million in AUM. In early May 2011, that number was over $581 million.
iShares MSCI Brazil Index Fund (NYSE: EWZ) EWZ and its Brazil ETF brethren have had their share of problems recently. Still, EWZ was the third-largest emerging markets ETF overall and the largest-country specific fund (excluding funds tracking the S&P 500) at the end of April.
That meant EWZ almost $8.6 billion in AUM. That number has since fallen to $8 billion. At the end of April 2011, EWZ had almost $13.2 billion in AUM. EWZ is down 20% in the past year.
iShares MSCI Japan Index Fund (NYSE: EWJ) There might yet prove to be value among Japanese equities. Then again, some folks have been saying that for years and the bull case has never really materializes. We know this much: EWJ is trading lower than where it was in the days immediately following the natural disasters that struck Japan last year. EWJ is down 8.4% since May 2011, but its AUM has slid much worse on a percentage basis. At the end of April 2011, EWJ had $7.5 billion in assets. As of May 10, that number was less than $5.3 billion.
iShares Silver Trust (NYSE: SLV) It was less than 13 months ago that SLV was flirting with $47. Maybe it was manipulation in the silver market, maybe was increased margin requirements or a combination of both that led to silver's 2011 demise. Whatever the reason, SLV had $17.2 billion in AUM at the end of April 2011. It had less than $9 billion as of May 10. No, it's not surprising that the fund is down 18% in the past year when seeing that type of AUM decline. Maybe the question should be why isn't SLV down more?
Energy Select Sector SPDR (NYSE: XLE) With the recent plunge in West Texas Intermediate, NYMEX oil futures have turned negative on the year. Oddly enough, in the past three months, equity-based XLE has performed almost twice as worse as the futures-based U.S. Oil Fund (NYSE: USO).
An interesting phenomenon and one that underscores the notion investors aren't satisfied with integrated oil stocks. Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX) account for 34% of XLE's weight. That may or may not be a reason for XLE's AUM tumble, but the tumble has occurred. From April 30, 2011 to April 30, 2012 XLE saw its AUM haul dwindle to $7.7 billion from $10.4 billion. Another $1.1 billion has been pulled from the fund since the start of May.
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