Rydex is pulling the plug on 12 out of 14 leveraged ETFs which have failed to attract significant assets after nearly two-and-a-half years of trading. [What Happens When an ETF Closes.]
Matt Hougan for Index Universe reports that the last day of trading for the funds will be May 21 and shareholders of record will receive cash payments based on the full net asset value of the funds on May 28. No closing costs are going to be charged. [Two Uses for Leveraged and Inverse ETFs.]
The funds have a total of $129 million in assets, less than 2% of Rydex’s total ETF business. It’s generally accepted that ETFs need around $50 million-$100 million in assets to be profitable.
Rydex CEO Rich Goldman says the closures are in the best interest of the shareholders and that not being a mover in the inverse and leveraged space hurt the funds. Goldman stressed, though, that the closure of these funds shouldn’t be taken as a signal that Rydex is exiting the leveraged and inverse space in either mutual funds or ETFs.
The closing ETFs are:
- Rydex 2X Russell 2000 (NYSEArca: RRY)
- Rydex Inverse 2X Russell 2000 (NYSEArca: RMM)
- Rydex 2X S&P MidCap 400 (NYSEArca:RRZ)
- Rydex Inverse 2X S&P MidCap 400 (NYSEArca: RMS)
- Rydex 2X S&P Select Sector Energy (NYSEArca: REA)
- Rydex Inverse 2X S&P Select Sector Energy (NYSEArca: RFL)
- Rydex 2X S&P Select Sector Financial (NYSEArca: RHM)
- Rydex Inverse 2X S&P Select Sector Financial (NYSEArca: RTG)
- Rydex 2X S&P Select Sector Health Care (NYSEArca: REC)
- Rydex Inverse 2X S&P Select Sector Health Care (NYSEArca: RFN)
- Rydex 2X S&P Select Sector Technology (NYSEAra: RHO)
- Rydex Inverse 2X S&P Select Sector Technology (NYSEArca: RTW)
Rydex won’t be closing the Rydex 2x S&P 500 (NYSEArca: RSU) or the Rydex Inverse 2x S&P 500 (NYSEArca: RSW), which are popular with investors. They hold $115 million and $84 million in assets, respectively. Rydex’s CurrencyShares and Equal Weight funds will not be affected, either.
Despite the closures, Rydex is very much looking forward and sees its ETF business as otherwise robust.