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A look at ETF Trading Volumes and Total Assets

July 5th, 2009 · 7 Comments

With Exchange-Traded Funds (ETFs) multiplying faster than mosquitoes in a puddle of water these days, it is worth examining how some of the more established ones are faring with respect to trading volumes and total assets. To find out, I looked up data on ETFs introduced before 2008 by iShares and Claymore and obtained the average trading volume data from the TSX website.

The ETFs in the two spreadsheets below are sorted on how much in fees (column 5) each ETF earns for the vendor (total fees = total assets * management fee). The idea is to figure out which ETFs are more likely to be liquidated due to too little assets or too little trading volumes. This isn’t mere idle speculation — ETF closures are reaching epidemic proportions south of the border.

Ron Rowland, a money manager, maintains an ETF Deathwatch on the Invest with an Edge website. To qualify, an US-listed ETF must be at least 6 months old and have an average daily value trade of $100,000 or less (which according to Mr. Rowland is the cut-off for a sustainable fund). The good news is that the vast majority of iShares and Claymore ETFs appear sustainable according to Mr. Rowland’s criterion. The bad news? iShares CDN Jantzi Social Index Fund (XEN) and Claymore S&P Global Water Index Fund (CWW) would have qualified for the list.

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7 responses so far ↓

  • 1 Gaby // Jul 6, 2009 at 12:41 am

    Thanks for the info. Will help me avoid certain ETF’s in building up my portfolio. Now if only Vanguard would open up some ETF’s here. How can the same ETF here be .60% MER while the same Vanguard one is only .15%? But at that low price, I may go all in with Vanguard.

  • 2 MoneyEnergy // Jul 6, 2009 at 1:04 am

    Thanks for the note on ETF closures in the U.S. I haven’t heard much about that, actually. So what’s your take on the most sustainable Canadian ETFs? Most of them, except the two you mentioned at the bottom? I own some XMA and COW… maybe one other one.

  • 3 Charles in Vancouver // Jul 6, 2009 at 10:45 am

    I own XEN myself. I’m quite aware of its small trading volume but I hope it will stay around anyway because it’s the cheapest socially-screened Canadian equity fund in town.

  • 4 Doug // Jul 7, 2009 at 7:39 am

    One of the attractive features of ETFs is their low cost. A part of the cost is the bid ask spread. On the larger, more liquid ETFs, my guess is that the spread is small. I wonder whether it’s like on the smaller, less frequently traded ETFs.

  • 5 Chris // Jul 7, 2009 at 9:58 am

    I’m curious about the AUM for the Claymore ETFs. Does it include the adviser class shares? If it does, I wonder what proportion of the AUMs they account for.

    It’s really too bad that the more specialized ETFs from both companies have been so neglected. XCV and XCS seem like great products to increase exposure to value and small cap stocks respectively. I’m surprised they didn’t get any interest from people hoping to beat the index over the long term.

    I own XCV and despite what looks like a huge risk of liquidation, I just can’t see any better way to increase broad exposure to Canadian value stocks.

    I’m equally surprised that some of the Claymore specialized ETFs like CLO (oilsands stocks) and CMW (mining stocks) don’t have greater assets. I would think they should have been easy to sell during the commodities frenzy last year.

  • 6 Canadian Capitalist // Jul 7, 2009 at 11:09 am

    @Gaby: To be fair, it is difficult for Canadian funds to match Vanguard’s scale. Vanguard’s ETFs are a class of their existing mutual funds and I’d be very surprised if any Canadian ETF is able to match Vanguard fees. Still, this shouldn’t matter to us retail investors — we’ll have to do what’s best for us.

    @MoneyEnergy: I’m surprised at how much of a cash cow COW is for Claymore. I think the ones towards the bottom are likely to thrive. I can’t see XIU or even XSB being shut down.

    @Charles: I hope so too. Like you say, XEN is hardly one of the questionable ETFs out there.

    @Doug: The bid/ask spread analysis is how this project started out but got sidetracked. I’ll post on the spreads next week.

    @Chris: No, it doesn’t include advisor class shares. However, for CWW the average volume of CWW.A is onlt 1,400. That’s why I think it qualifies for the “Deathwatch” but CJP doesn’t.

  • 7 This and That: Stock Market History, Emerging Markets, International Diversification and more… | Canadian Capitalist // Jul 16, 2009 at 11:29 pm

    [...] hat tips: David Berman, who writes the Globe Investor Market Blog, cited this post in The trouble with ETFs. Rob Carrick listed this blog among his favourites on BNN. Thanks [...]

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