A good friend prompted me to look into this fund – AdvisorShares Meidell Tactical Advantage ETF(MATH), and I was surprised to see it is set to be closed in three days – March 29, 2018.
It is commonly understandable and acceptable that ETFs, similar to stocks in the sense of highly regulated by the SEC to be listed in exchanges, go through the fierce market competition to survive and keep being listed to afford the maintenance fee rendered on the fund sponsors/issuers. Under circumstances such as a lack of investor interest, a limited amount of assets (once a fund surpasses the $50 million mark in AUM, it’s far less likely to close), or fund sponsors’ arbitrary decision to cull their line-ups to be more effective and profitable. When a fund is under the siege of one of multiple of above situations, investors/holders of these ETFs will feel the liquidity and high transaction fee pressure, pushing the expedition of delisting such funds from being listed. Hundreds of the ETFs are launched each year, and hundreds of them are withdrawn from the market each year too.
So the next question is what happens to the investors when an ETF is undergoing close? Is it still worth purchasing? Apparently, it’s not a good investment for your long-term strategy. However, there are arbitragers making extraordinary money by betting on “closing ETFs”, taking advantage of the price can be shorted to below its NAV, and buying in at that time for a sure arbitrage profit. For general retail investors, I won’t recommend such an attempt. Last and foremost, the closure or delisting of an ETF is much less panicking than that of a stock, for securities composing the ETF is still largely traded, hence, investors won’t incur a huge loss because of this mishap event.
AdvisorShares Meidell Tactical Advantage ETF(MATH) is an actively managed ETF, meaning in essence, it is an actively managed fund like traditional assets relying in on the expertise of portfolio managers to cherry pick the right stocks, but it take the exchanged-traded form. Therefore, the fee for MATH is as high as 1.56%, far costly than true ETFs’, and there is no underlying index for MATH. The issuer is AdvisorShares, claiming the employment of a “Quantitative Tactical Asset Allocation” strategy for running MATH, more specifically, “along-only tactical strategy that identifies asset classes or sectors trending positively and dynamically adjusts its allocation to be broadly
diversified, concentrated, or in cash, as a tool to reduce overall portfolio volatility and risk. It was issued in 2011, and as of Mach 2018, the AuM amassed is about $14.58 Million. The five-year annualized return is about 3.8%, quite mediocre performance, especially given the consideration of that steep-high commission fee they charge.
AdvisorShares have offered to the market a basket of 17 ETFs as of today (March 26, 2018) with five of them exceeding $100 Million of AuM.
The top one – AdvisorShares Dorsey Wright ADR ETF(AADR) fares well with a relatively low fee at 0.99% but a splendid return of ~12.7% per annum. In this actively managed fund, ADR stocks are hand-chosen for their strong price momentum (Relative Strength, as defined by sub-advisor Dorsey Wright and Associates). There are about 30 holdings in the portfolio.