E-Trade closes its index funds

E*Trade Financial Corp. has closed its line of four index funds with liquidations to take place no later than March 27.
FEB 25, 2009
E*Trade Financial Corp. has closed its line of four index funds with liquidations to take place no later than March 27. In a filing this week with the Securities and Exchange Commission, the New York-based online firm stated that the funds were closed as of Feb. 23. The closed funds include: the $84 million E-Trade International Index Fund (ETINX), the $68 million E-Trade Russell 2000 Index Fund (ETRUX), the $230 million E-Trade S&P 500 Index Fund (ETSPX) and the $23 million E-Trade Technology Index Fund (ETTIX). Separately, the company is also shuttering E-Trade Kobren Growth Fund (KOGRX), an actively managed fund with about $40 million in assets. The funds’ launch dates ranged from 1996 to 2000. Relative to other index funds in the industry, the funds had a small amount of assets, said Scott Burns, director of ETF analysis at Chicago-based fund tracker Morningstar Inc. “When you run an open-end fund, you have to [pay for] the whole back-office support and servicing operations,” he said. “I guess the funds didn’t really get a lot of traction. As always, it’s probably economics.” The funds, which had expense ratios ranging from 0.6% to 0.22%, are a little more expensive than comparable ETFs, Mr. Burns said. E-Trade spokeswoman Tina Martineau said: “The funds didn't gain the traction needed to maximize the economies of scale. The decision to liquidate the funds was not related to performance. The funds had dwindling assets because of the market volatility.” The firm is exiting the proprietary-fund business with these liquidations, she said. “We are moving towards open architecture,” she said. “Gathering the best of the funds for our supermarket and offering them to investors is our goal.” According to the filing, each fund will automatically redeem its outstanding shares on the liquidation date at the net asset value of the shares. The firm will pay all liquidation-related expenses other than brokerage expenses, the filing said.

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