Tags: Steinhardt | cashing | out | ETF

WisdomTree's Steinhardt Cashes Out ETF Holdings

Friday, 07 Dec 2012 12:04 PM

By Michael Kling

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Michael Steinhardt, chairman and largest owner of one the largest exchange-traded fund (ETF) sponsors, is cashing out his holdings, according to Institutional Investor. Does he something others don't about the ETF industry that others don’t?

In a move seen as designed to help Steinhardt cash out, WisdomTree, the seventh largest sponsor of ETF, announced a follow-on equity offering of 26 million shares owned by Steinhardt and other insiders. He and the foundation he owns with wife had already sold over 10 million shares on Nov. 15.

"These are some of the smartest people in the room in the ETF universe," Dave Nadig, research director at ETF research firm IndexUniverse, told Institutional Investor.

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

Other experts say it's difficult to tell what Steinhardt's liquidation move reveals about the ETF industry.

Money continues flowing into ETFs, according to Institutional Investor. For instance, WisdomTree's assets under management increased 12 percent during the third quarter.

Yet there are fewer ETFs as more funds shut down. Almost 100 ETFs have closed this year. WisdomTree just closed three of its 49 funds.

A price war is forcing the ETF industry to consolidate and cut costs, Nadig told Institutional Investor. "We've seen consolidation happen around the industry. Companies are refocusing on core products."

Even though the number of ETF and exchanged traded notes (ETNs) increased in November, consolidations will continue, said Ron Rowland, executive editor for Investwithanedge.com.

There are now 359 exchange traded products with less than $10 million in assets, but many experts believe they need at least $75 million to $100 million to be sustainable, Rowland, president and founder of Capital Cities Asset Management, said.

"There are clearly hundreds of unprofitable ETFs and ETNs on the market," he stated.

"Additional closures are inevitable. It would be premature to claim the industry consolidation is over."

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

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