Exchange-traded funds (ETFs) have exploded in popularity in recent times, but some are struggling.
U.S.-based Rydex SGI recently said it would close 12 of its 14 leveraged and inverse (short) ETFs that make up $129-million (U.S.) in assets, or less than 2 per cent, of its $7-billion in ETF assets under management.
Competition in the leveraged ETF market has been fierce as competitors like Direxion and ProShares have aggressively expanded their fund lineups, and U.S. regulators have been clamping down on the sector. See previous Fund Watch blog.
But ETF DataBase analyst Michael Johnson also suggests that Rydex's move could indicate a new strategy under a new owner. Just after buying Claymore Group Inc., which controls Toronto-based Claymore Investments Inc., Guggenheim Partners in February acquired a controlling interest in Security Benefit Corp., which owns the Rydex ETFs.
Rydex's four business lines includes the leveraged and inverse ETFs, but the company's most popular ETFs are the equal-weighted funds that offer a twist on many equity benchmarks, writes Mr. Johnson.
In Canada, Bank of Montreal is targeting the equal-weighted category with some of its BMO ETFs while rival iShares Canada is focused on market-capitalization weighted stocks.
Maybe the Claymore/Rydex folks will give the Canadian bank some competition in this niche.
The Rydex funds that will trade for the last time on May 21 include:
Rydex 2x Russell 2000 ETF (NYSEArca: RRY)
Rydex 2x S&P MidCap 400 ETF (NYSEArca: RMM)
Rydex 2x S&P Select Sector Energy ETF (NYSEArca: REA)
Rydex 2x S&P Select Sector Financial ETF (NYSEArca: RFL)
Rydex 2x S&P Select Sector Health Care ETF (NYSEArca: RHM)
Rydex 2x S&P Select Sector Technology ETF (NYSEArca: RTG)
Rydex Inverse 2x Russell 2000 ETF (NYSEArca: RRZ)
Rydex Inverse 2x S&P MidCap 400 ETF (NYSEArca: RMS)
Rydex Inverse 2x S&P Select Sector Energy ETF (NYSEArca: REC)
Rydex Inverse 2x S&P Select Sector Financial ETF (NYSEArca: RFN)
Rydex Inverse 2x S&P Select Sector Health Care ETF (NYSEArca: RHO)
Rydex Inverse 2x S&P Select Sector Technology ETF (NYSEArca: RTW)