PowerShares Shut down 19 ETFs

On one hand, the exchange-traded fund (ETF) industry continues to expand at a record pace (the total number of ETFs at the end of 2008 grew to 747, up 118 from 2007); on the other hand, funds that get no love from investors are being eliminated. Last Friday, PowerShares, one of the major players in the ETF world, announced that it will shut down 19 funds. Even though the number of funds to be closed is roughly 12% of PowerShares’ total 154 ETF offers, the assets in those funds represent less than 1% of the PowerShares’ total assets, which is exactly what the problem is. According to Morningstar data, of those 19 ETFs listed below, at most only a few thousands shares changed hand each day for some while most having trading volumes in the hundreds. This is also the case when Claymore Securities closed 11 ETFs last year.

  • PowerShares Dynamic Aggressive Growth Portfolio (PGZ)
  • PowerShares Dynamic Asia Pacific Portfolio (PUA)
  • PowerShares Dynamic Deep Value Portfolio (PVM)
  • PowerShares Dynamic Europe Portfolio (PEH)
  • PowerShares Dynamic Hardware & Consumer Electronics Portfolio (PHW)
  • PowerShares FTSE RAFI Asia Pacific ex-Japan Small-Mid Portfolio (PDQ)
  • PowerShares FTSE RAFI Basic Materials Sector Portfolio (PRFM)
  • PowerShares FTSE RAFI Consumer Goods Sector Portfolio (PRFG)
  • PowerShares FTSE RAFI Consumer Services Sector Portfolio (PRFS)
  • PowerShares FTSE RAFI Energy Sector Portfolio (PRFE)
  • PowerShares FTSE RAFI Europe Small-Mid Portfolio (PWD)
  • PowerShares FTSE RAFI Financials Sector Portfolio (PRFF)
  • PowerShares FTSE RAFI Health Care Sector Portfolio (PRFH)
  • PowerShares FTSE RAFI Industrials Sector Portfolio (PRFN)
  • PowerShares FTSE RAFI International Real Estate Portfolio (PRY)
  • PowerShares FTSE RAFI Telecommunications & Technology Sector Portfolio (PRFQ)
  • PowerShares FTSE RAFI Utilities Sector Portfolio (PRFU)
  • PowerShares High Growth Rate Dividend Achievers Portfolio (PHJ)
  • PowerShares International Listed Private Equity Portfolio (PFP)

Since most ETFs are still taking the passive approach, an index has to be created first before an ETF can be launched. However, there are just so many sectors and some countries/regions, it’s just unrealistic to expect every new ETF to become attractive to investors. In fact, nearly half of the ETFs on Morningstar’s complete ETF list don’t get more than a  few thousands of shares traded each day. I doubt how many of them at the bottom of the list probably will survive.

I am gald that three PowerShares ETFs I own, PowerShares Golden Dragon Halter USX China (PGJ), PowerShares Water Resources (PHO), and PowerShares Intl Dividend Achievers (PID), are not included in the list, though they aren’t that popular.

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5 Responses to “PowerShares Shut down 19 ETFs”

  1. Nathan |  May 05, 2009 at 11:35 am

    What exactly happens to the money invested in those ETFs when they are shutdown? Do you get any of your money back or does the ETF stock lose all value?

    I own a bit of PEY so I am not affected right now but it worries me that I don’t know what would happen if PowerShares decided to shut it down.

  2. Sun |  May 05, 2009 at 11:56 am

    @Nathan Assets of those ETFs to be closed will be liquidated and you will receive cash equivalent to the amount of shares you hold as of May 18th. You will get your money back, but how much will depend on the market value on May 18th if you don’t sell your shares before that.

  3. Dividend Growth Investor |  May 08, 2009 at 8:04 am

    So much for ETF’s being “passive investments”. If you own mutual funds and ETFs you are pretty much at the mercy of the company that operates them. Now if you use broadly diversified index etfs chances are these won’t get decommissioned any time soon.. But who knows :-)