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ETFs being wound up
Posted: Fri Feb 23, 2024 4:15 am
by torata
Question is:
Do Toshi shintaku trusts also get wound up?
There's a bit of background to explain the question:
One of the ETFs I have 'Nikkei 400 Small and Mid-cap' (ticker: 1492, Mitsubishi UFJ) is being wound up because it's become too small and now inefficient to run.
It's mostly in a general account, but there's a small amount also in an original NISA so I'll lose that tax-free portion. (It's annoying, but not as annoying as iShares closing down 2 ETFs, making about 70% of one year's old-NISA contribution, 6 months after buying them.)
I'm looking to replace, and in fact can replace almost the full amount of what's sold within this year's Growth shin-NISA.
I have some choices. I can replace with another ETF following exactly the same index (actually it's a lot bigger than the ETF I had, but run by a less well known name, and I guess in theory the same thing could happen).
I can however replace with a 投資信託 fund (emaxis) run by the same Mitsubishi UFJ AM following the same Nikkei 400 Small and Mid-cap. I know that in theory if this was closed for similar reasons to the ETF, I get given back the allowance amount in the shin-NISA, but just wondering the likelihood of this as I'd prefer to avoid the hassle.
So do 投資信託 trusts also get wound up?
torata
Re: ETFs being wound up
Posted: Fri Feb 23, 2024 10:12 am
by Tsumitate Wrestler
torata wrote: ↑Fri Feb 23, 2024 4:15 am
Question is:
Do Toshi shintaku trusts also get wound up?
There's a bit of background to explain the question:
One of the ETFs I have 'Nikkei 400 Small and Mid-cap' (ticker: 1492, Mitsubishi UFJ) is being wound up because it's become too small and now inefficient to run.
It's mostly in a general account, but there's a small amount also in an original NISA so I'll lose that tax-free portion. (It's annoying, but not as annoying as iShares closing down 2 ETFs, making about 70% of one year's old-NISA contribution, 6 months after buying them.)
I'm looking to replace, and in fact can replace almost the full amount of what's sold within this year's Growth shin-NISA.
I have some choices. I can replace with another ETF following exactly the same index (actually it's a lot bigger than the ETF I had, but run by a less well known name, and I guess in theory the same thing could happen).
I can however replace with a 投資信託 fund (emaxis) run by the same Mitsubishi UFJ AM following the same Nikkei 400 Small and Mid-cap. I know that in theory if this was closed for similar reasons to the ETF, I get given back the allowance amount in the shin-NISA, but just wondering the likelihood of this as I'd prefer to avoid the hassle.
So do 投資信託 trusts also get wound up?
torata
Trusts trade less frequently, have less trading costs, and less chance of being wound up due to trading costs. It is still possible.
The index was also rebalanced last year, it was probably a costly rebalancing with the TSE changes.
Re: ETFs being wound up
Posted: Fri Feb 23, 2024 12:48 pm
by TokyoWart
I am not sure about the rules in Japan but all Unit Investment Trusts in the US are required to have an expiration date. This is even true for the enormously successful SPY ETF (expires 2118) and the QQQ ETF (expires in 2124). More broadly, the majority of mutual funds and ETFs are not successful and are liquidated by their issuers. You don't hear about them much because this is much more common for experimental or gimmicky funds, but liquidations are not that unusual if you consider the entire universe of funds (which are numerically greater than the total number of stocks).
Re: ETFs being wound up
Posted: Fri May 03, 2024 12:58 am
by ToushiTime
torata wrote: ↑Fri Feb 23, 2024 4:15 am
Question is:
Do Toshi shintaku trusts also get wound up?
There's a bit of background to explain the question:
One of the ETFs I have 'Nikkei 400 Small and Mid-cap' (ticker: 1492, Mitsubishi UFJ) is being wound up because it's become too small and now inefficient to run.
It's mostly in a general account, but there's a small amount also in an original NISA so I'll lose that tax-free portion. (It's annoying, but not as annoying as iShares closing down 2 ETFs, making about 70% of one year's old-NISA contribution, 6 months after buying them.)
I'm looking to replace, and in fact can replace almost the full amount of what's sold within this year's Growth shin-NISA.
I have some choices. I can replace with another ETF following exactly the same index (actually it's a lot bigger than the ETF I had, but run by a less well known name, and I guess in theory the same thing could happen).
I can however replace with a 投資信託 fund (emaxis) run by the same Mitsubishi UFJ AM following the same Nikkei 400 Small and Mid-cap. I know that in theory if this was closed for similar reasons to the ETF, I get given back the allowance amount in the shin-NISA, but just wondering the likelihood of this as I'd prefer to avoid the hassle.
So do 投資信託 trusts also get wound up?
torata
I don't know how often it happens but if you are worried, look at the prospectus and find the bit about 繰上償還 early liquidation, which sets a minimum amount of investment units or net asset value below which the fund could be wound up. After that, check the current net value of the fund and/or its number of investment units and make sure that they are well above these thresholds.
For example, page 10 of this prospectus about a Nasdaq 100 fund claims the right to wind up if there are less than 3 billion units or its net asset value falls below 3 billion yen. Note that it also says 等, so it could technically wind up for other reasons.
https://www.nam.co.jp/report/pdf/mo122308-1.pdf