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ETF Industry Experiences Major ‘Hiccup’ at XShares

By Editorial Staff

August 26, 2008

The unbridled growth of exchange-traded fund assets and products appears to have hit a speed bump, at least for now, The Wall Street Journal reports.

 

XShares Advisors is closing 15 of 19 specialized healthcare ETFs it launched not only a year ago, and reorganizing the remaining four. Though the firm continues to have solid faith in the sub-sectors—including dermatology, wound care, infectious diseases and metabolic-endocrine disorders—XShares acquiesces that they did not “resonate” with investors, said Marsha Zapson, a spokeswoman for XShares.

 

But Morningstar ETF analyst Paul Justice was not as optimistic about the specificity, calling the funds slated to be closed on Oct. 1 “overly specialized to the point that they likely didn’t attract the sufficient amount of assets.”

 

XShares said the closures will result in higher assets under management, higher market capitalizations, more holdings in each portfolio, higher minimum investment thresholds, and, the company promises, "significantly" lower expense ratios.

 

“We’re hoping that these new, redesigned products with lower expense ratios will gain some traction with the investing public,” Zapson said.


Morningstar’s Justice seemed to agree, saying that an ETF based on fighting cancer, for example, is “a theme that people can relate to on a broader basis.”


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