The Death of the Carbon Fund ETF (ASO)

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There are ETF and ETN products for just about everything.  Equities, commodities, and more.  This is even one for “Eu Carbon Allowances,” but not for long.  XShares Advisors LLC has determined to liquidate its AirShares EU Carbon Allowances Fund (NYSE: ASO).  This held much promise for the green investors and for those investors who might have needed some exposure to carbon offsets.  Unfortunately, that promise never took off in trading volume.

The fund termination date will be effective as of July 31, 2009.  That will be the last day of trading for the shares and the last day on which creation unit aggregations of Fund Shares may be purchased or redeemed.  The formal halt will come before the open of trading on August 3, 2009.  Holders can sell shares now and ahead of the closure, but be advised that XShares said the fund will begin liquidating its portfolio effective immediately.  Another notion to consider is that the transaction costs incurred by the Fund in liquidating its portfolio will be reflected in the Fund’s net asset value.

In the release, XShares gave it all the earmarks of a failed business… “XShares Advisors LLC has carefully considered current market conditions and thereafter determined that, as a result of the Fund’s small size, inability to attract significant market interest since its inception and future viability, as well as the prospects for growth in the Fund’s assets in the foreseeable future, it was advisable and in the best interests of the Fund and its shareholders to liquidate the Fund.”

As per its description… This is a commodity pool that seeks to provide investors with investment results generally corresponding, before payment of ASO’s expenses and liabilities, to the performance of a basket of exchange-traded futures contracts for European Union Allowances (EUAs). An EUA is an entitlement to emit one metric tonne of carbon dioxide equivalent that is transferable under the European Union Greenhouse Gas Emissions Trading Scheme (EU ETS). The EU ETS is a cap-and-trade program that provides financial incentive for signatory countries of the Kyoto Protocol to reduce their carbon emissions.

The AirShares has actually held up in value since its January 2009 launch.  But the volume has been paltry at best.  There are some days it did not even trade shares, and the July 20 date with 8,600 shares trading hands was only the third most active day in the last three months.

This one had all the intentions of being able to offer a way into the cap-and-trade market for investors directly in an easy to trade ETF structure.  But it never took off.

We have noted before how many ETF and ETN products need to pursue reverse splits and some may even need to close.  You can join our open email distribution list to hear about key ETF developments, IPO’s, secondary offerings, mergers, key insider activity, and more.

JON C. OGG
JULY 24, 2009