NEW YORK ( TheStreet) -- As investors digest Tuesday's data from the Case-Shiller housing indexes, they will have one less tool to work with. On Monday, MacroShares shuttered two ETFs that allowed investors to make bullish and bearish bets on the Case-Shiller Composite-10 Home Price Index. The Major Metro Housing Up ( UMM) ETF and Major Metro Housing Down ( DMM) ETF, is the third paired ETF group from MacroShares to close down. MacroShares has also shelved two sets of oil funds since 2008, as structural problems and oil volatility sunk the pairs. While investors pay particular attention to the release of housing data, UMM and DMM failed to capture its intended audience. These two funds recently reached an early termination trigger when their assets on deposit fell under $50 million. According to the latest Case-Shiller report, U.S. home prices fell at a slower annual rate in October. While housing declines in major metropolitan areas do not appear to be getting worse, the data show that the indexes are flat when compared with the previous month. The goal of MacroShares' funds was to allow investors to bet on the direction of the Case-Shiller indexes and the prospects for major metropolitan housing. The paired funds were unable to attract enough investor assets to continue their investment strategy. The fate of the MacroShares funds should be of particular concern to ETF investors, who face an increasingly broad range of choices when selecting strategies. The failure of the paired-fund approach continues to raise concerns about the future of non-traditional ETF strategies.
When ETFs close down, investors are often the hardest hit. Generally, there is a period between when a fund announces its closing and the final halt of trading. During this period, investors can choose to sell their shares or hold on to their investment in order to receive its underlying value at a future date. Selling an ill-fated ETF in the open marketplace can often be a losing proposition. An influx of sellers and absence of buyers often causes the fund to trade at a discount to its underlying value, or NAV. Investors who choose to wait for redemption have to weigh the opportunity cost of having funds tied up. In the case of UMM and DMM, investors will have to pay up as the funds wind down. MacroShares estimates that the early termination expenses will range from $0.85 to $0.90 per share, or about 4% of the share price. Structure and liquidity are important factors in determining the viability of an ETF. While a fund may track an important investment concept, sometimes it fails to attract investors or has a strategy that fails in open-market trading. UUM and DMM may have been the only ETFs to track the Case-Shiller indexes, but investors have other options for betting on real estate in the ETF universe. REIT ETFs, such as the SPDR Dow Jones REIT ETF ( RWR) and the First Trust S&P REIT ( FRI), provide different ways to access the REIT marketplace. -- Written by Don Dion in Williamstown, Mass.