From the November 2008 issue of Research Magazine • Subscribe!

November 1, 2008

Bear Stearns Liquidates ETF

Just months after being launched, the plug has already been pulled on the Bear Stearns Currency Yield Fund (YYY). The fund, which gained infamy for becoming the first actively managed exchange-traded fund (ETF), was slated to cease trading on October 1.

The circumstances surrounding Bear Stearns' launch of the Currency Yield Fund were less than ideal from the get-go. As the ill-fated investment bank was occupied with survival during March, the company somehow managed to launch the Currency ETF despite rumors it wouldn't.

Even though Bear Stearns beat other firms to the race by launching the first actively managed ETF, the long-term success of the fund was in doubt from the beginning.

During its short life the Currency Fund was only able to attract roughly $50 million in assets.

Second in line to launch an active ETF was InvescoPowerShares.

Since being introduced in April, PowerShares' suite of active ETFs has not accumulated a significant asset base. Combined, the PowerShares Active Alpha Multi Cap Fund (PQZ), PowerShares Active AlphaQ Fund (PQY), PowerShares Active Mega Cap Fund (PMA) and PowerShares Active Low Duration Fund (PLK) account for just $17.09 million.

Actively managed ETFs, especially active bond ETFs, might receive more interest as established fund managers enter the market with new product offerings.

The Currency Fund's liquidation will mark the 40th closing of an ETF in 2008.

Despite the promise of active ETFs, the ETF marketplace continues to be dominated by products linked to market indexes.

XShares Advisors, Claymore, Ameristock and MacroShares are among the fund providers that have decided to close ETFs so far this year.

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Ron DeLegge is the San Diego-based editor of www.etfguide.com.

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