The company could have closed STH and launched WMCR. However, the firm instead opted to change STH's underlying index, name, and ticker symbol, thereby completely altering the fund's focus. There was no need to halt STH's trading or liquidate fund's assets. One day investors were holding STH and on the next, WMCR appeared in its place.
While investors do not have to worry about remembering closure dates or having their money being tied up in this scenario, this unique type of fund closure can also cause troubles. For instance, in the event that an unprepared STH investor was also holding a fund such as the First Trust Dow Jones Select MicroCap Index Fund (FDM), the investor could get caught with overexposure to this volatile part of the market when STH turned into WMCR.
The recent spell of fund closures hitting the ETF industry has brought to light the importance of avoiding unpopular, illiquid funds which stand the greatest risk for shuttering. However, in the event that you are caught holding a product that gets slated for execution, it's possible to avoid headaches by paying close attention to how the fund's closure progresses.Written by Don Dion in Williamstown, Mass.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV