Groundbreaking ETF Crashes and Burns

First actively managed fund shuts down.

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After failing to attract enough investors, JPMorgan Chase said it's liquidating the first actively managed U.S.-traded ETF, which was created by Bear Stearns (called the Bear Stearns Current Yield Fund.) Bloomberg reports:

The fund's opening was closely watched by money managers who want to offer actively traded ETFs as a lower-cost, more tax-efficient alternative to traditional index mutual funds, said Gary Gastineau, who runs ETF Consultants LLC in Summit, New Jersey. As of June 30, about 96 percent of its shares were still held by Bear Stearns Asset Management Inc., a unit of JPMorgan, according to the regulatory filings.

Murray Coleman of IndexUniverse says the shutdown hardly comes as a surprise. Why? Says Coleman:

  • The fund's launch was delayed several times amid rapidly deteriorating conditions at the parent investment bank.
  • It didn't hold long-enough-termed issues to qualify as a short-term bond portfolio.

An interesting bit of information reported by IndexUniverse: Wagers at rival ETF firms were made as to whether the Bear Stearns fund would survive.