Global X – a renowned player in the ETF business – decided to shut down four of its products on October 22, 2015. The closures reflect a lack of interest in these products in an investment world that has more than 1,700 U.S. listed ETFs. The four Global X ETFs hail from different areas of the investing arena and have failed to score on the scale of survival of the fittest for valid reasons. Let’s find out the reasons for their underperformance:
Global X Brazil Financials ETF (BRAF)
Investors never seem to have liked the fund as evident by the paltry AUM of $1.1 million amassed in the five years since its launch. Almost all Brazil ETFs have been beaten down but this particular one revolving around the key financial sector of an ailing Brazilian economy was crushed mercilessly.
The Brazilian economy is now in a technical recession. Its economy contracted 1.9% in the second quarter following a 0.7% decline in the first quarter. This marks the worst slowdown for Brazil in nearly three decades.
This downturn and an awful political situation recently led Standard & Poor to cut the economy’s credit rating from investment grade to a junk status with a negative outlook. The agency also warned of further downgrade if conditions do not improve. This clearly explains the reason behind BRAF’s underperformance. BRAF is down 41% so far this year and lost about 71% in the last five years (as of September 22, 2015) (read: S&P Downgrades Brazil to Junk: ETFs in Focus).
Global X Central Asia & Mongolia ETF (AZIA)
This fund provides exposure to 21 stocks of Central Asia that derive revenues or are traded in Mongolia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan or Uzbekistan. This is easily done by tracking the Solactive Central Asia & Mongolia Index.
This ETF is also an unpopular one with just $2.6 million of assets accumulated in over two years of launch. Issues in the Chinese economy and the commodity market crash weighed on this ETF. AZIA is off 16.4% so far this year (as of September 22, 2015) and shed 42% in the last five years (read: 4 ETFs Unexpectedly Rocked by China Turmoil).
Global X Guru Small Cap ETF (GURX)
The fund looks to track the price movements of the highest-conviction U.S. listed small cap equity holdings of a select group of Hedge Funds and Institutional Investors based on quarterly regulatory filings from the SEC. Though Global X has a proven track in rolling out products like this, the larger counterpart Guru Holdings Index ETF (GURU) has seen the most success (read: Another ETF Following Footsteps of Billionaires).
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