Williamstown, MA, July 11, 2008 --(PR.com
)-- XShares joined Claymore and Ameristock/Ryan this week when it folded seven ETFs that had a combined total of less than 14 million under management. Most industry experts agree that a single fund needs assets of greater than $50 to $100 million to survive in an ETF marketplace that has been awash in new fund listings.
Lead Market Makers, the electronic equivalent of their smock swathed brethren, Specialists, were created by the New York Stock Exchange (NYX) to provide liquidity on their electronic platform, NYSE Arca. While they do not glance at you from your television, many humans remain involved in the market making process.
Carolyn Dion, daughter of Fidelity Independent Adviser’s publisher Don Dion, acted as a market maker for a small NYSE specialist firm before returning home this spring to work with her father’s family of publications.
While working on Wall St., Dion served as a trading assistant on the NYSE before moving to the American Stock Exchange, becoming an exchange member and specialist all before her 25th birthday.
When NYX announced that they would be moving all current and future ETF listings to the electronic platform, specialist firms sprinted to ready their operations for the deluge. Soon after, Dion moved from the historic New York landmark to a trading desk at 55 Broadway, a location nestled between the specialist firm’s NYSE and AMEX operations.
AGV and AVU, two of the seven products shuttered by XShares in this week’s fund closing, were among the group of products designated to the specialist group for which Dion worked. When told about the funds’ liquidation this week Dion predicts that “information, in the form of professional advice, will separate successful ETF investors from the rest of the pack over time.”
Dion notes that one key symptom of a fund’s decline is volume: “A fund’s viability is dictated by the volume it can attract,” Dion said. “Both AGV and AVU had trouble drumming investor interest.”
XShares’ Adelante funds will continue trading until July 24th. Shareholders can unload their holdings in the open marketplace, or wait until the fund is fully liquidated on July 31 to receive the net asset value of their shares.
“The good news is that, unlike a stock, ETF shares have an intrinsic value,” Dion said, “the bad news is that you often pay large premiums for illiquid products, and receive a discounted price when you sell your shares.”
Will Adelante ETF shareholders be able to get their money’s worth if they try to sell their shares in the open market? While NAV is the benchmark for fund value, Dion notes that “there are many intangibles that come into play” in determining what price an investor might pay in an open market.
If investors choose to hold their shares until liquidation, they will receive a net asset value that correlates with the price at which the shares are liquidated—a price that may be different from the ETF’s value on the day it stops trading.
“While you may not get NAV selling your shares in the open market,” Dion warned, “if you hold your shares until liquidation, you are exposed to a host of factors that may impact share value.”
The influx of new funds into the market coupled with the liquidation of older funds has created uncertainty among investors.
“Information is invaluable,” Dion said, “Fidelity Independent Adviser offers a number of publications designed to arm subscribers with the tools necessary to survive in even the most difficult markets.”
Fidelity Independent Adviser publishes two weekly newsletters, ETF Momentum Tracker and PowerShares Momentum Tracker, along with a monthly publication, ETF Report. FIA recently debuted its Dynamic Global ETF investment service, a premium trading strategy that provides subscribers with weekly updates and trading alerts.
“Dynamic Global ETF trading service provides both fundamental and technical analysis,” Dion emphasized, “Fidelity Independent Adviser’s analysis has a proven track record.”
Fidelity Independent Adviser announced June 13 that the portfolio of one publication, Sector Momentum Tracker, had outperformed the S&P 500 by 27% net of fees since its inception four years ago. The flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and has 70,000 subscribers in the United States and 29 other countries.
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ETF Report http://store.fidelityindependentadviser.com/etfreport1yr.html
ETF Momentum Tracker
PowerShares Momentum Tracker
Dynamic Global ETF Investing Service http://store.fidelityindependentadviser.com/dynamicetf1yr.html
Fidelity Independent Adviser
Sector Momentum Tracker http://store.fidelityadviser.com/sectortracker.html
Retirement Income Guide
Publisher Don Dion is also president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Massachusetts, Dion Money Management manages more than $720 million in assets for clients in 49 states and 11 countries. A licensed attorney in Massachusetts and Maine, Mr. Dion has more than 25 years’ experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management. http://www.dionmm.com/