The closing of ETFs is not a new phenomenon, and in fact it occurs quite often. A total of 23 ETFs have been or are in the process of closing in 2014, according to ETF.com. And in 2013, 70 funds were closed. Thus, the announcement from ALPS last week stating that it will be liquidating all four of its ALPS | GS Momentum Builder ETFs by the end of the month shouldn’t have been a surprise, especially given the small asset size of the four funds.
The ALPS ETF Trust’s board of trustees voted to liquidate the Momentum Builder ETFs on considerations regarding the current market environment and the likelihood that the funds would not be able to grow their assets in the near future. The last day of trading for the four funds is August 27, one day prior to the planned liquidation of the funds. The four funds to be liquidated include:
- The ALPS | GS Momentum Builder Multi-Asset Index ETF (GSMA)
- The ALPS | GS Momentum Builder Growth Equities and U.S. Treasuries Index ETF (GSGO)
- The ALPS | GS Momentum Builder Asia ex-Japan Equities and U.S. Treasuries Index ETF (GSAX)
- The ALPS | GS Risk-Adjusted Return US Large Cap Index ETF (GSRA)
The four ETFs follow indices licensed from Goldman Sachs – from which they get the “GS” in their names. The three GS Momentum Builder funds are designed to provide exposure to price momentum in equity and U.S. fixed-income markets via ETF investments with highest six-month historical return, subject to certain qualifications. According to Bloomberg News, there are 16 U.S. momentum ETFs with $3.7 billion in assets, but they’ve only taken in an additional $57 million in 2014. With a different strategy, the ALPS | GS Risk-Adjusted Return US Large Cap Index ETF is a pure stock portfolio that weighted sectors using a “risk-parity” approach.
All four funds were launched on December 20, 2012, and the best-performer of the bunch – the Risk-Adjusted Return US Large Cap Index ETF (GSRA) – generated cumulative returns of 38% since inception (see the chart below). But the funds have been unable to attract many investors, with total assets of the four combined at roughly $10.5 million, and no single fund with more than $3.4 million in assets under management. This is ultimately why the funds are being shuttered.
Although the funds will continue trading through August 27, the liquidation has already begun. This means that the funds’ assets and their share prices will diverge between now and the completion of the liquidation. According to Morningstar, the Momentum Builder Multi-Asset Index ETF (GSMA) had a share price of $26.86 on August 15, but net-asset value of $27.48, for instance. Further information can be found at the ALPS | Goldman Sachs Index ETF Series website.