Northern Trust Bows Out, Plans To Close 17 ETFs

After a stormy 2008 in which a record number of exchange-traded funds were closed, consolidation in a new year is kicking off with a vengeance.

In a surprising move for investors, Chicago-based Northern Trust says it will close all 17 of its exchange-traded funds on Feb. 20.

The decision to shutter the Northern Exchange Traded Shares, or NETS, with about $33 million in assets heading into 2009, was made in consultation with trustees of the funds, according to a terse statement issued before markets closed on Tuesday.

"The board considered current market conditions, the inability of the funds to attract significant market interest since their inception, their future viability as well as prospects for growth in the funds' assets in the foreseeable future," said the release.

The closures by the financial services giant come some nine months after launching its first wave of ETFs. (See related story here.) At the time it first entered the market last spring, Northern Trust seemed to present a positive sign to investors that another large institutional manager was ready, willing and able to move with gusto into the ETF marketplace.

In all, Northern Trust had filed with regulators to launch about 27 different ETFs. And several were designed to create access for individual investors and their advisors to markets that hadn't been available in the past.

Those included an ETF focused on Ireland, another on Israel, one for Portugal and one on Japanese real estate investment trusts, among others. According to its filings, Northern Trust had 20-specific country NETS in the works, along with four international REIT funds and three global funds.

By far the most exciting of the new NETS described in filings was the Dow Jones Wilshire Global Total Market ETF. (See related story here.) This fund, along with the complementary NETS FTSE CNBC Global 300 ETF, were to be the first truly global ETFs, combining U.S., international developed and emerging markets exposure into a single ETF.

The global total market fund never got off the ground. But the global 300 did. (See related article here.)

Since then, other rival ETF providers have jumped into the global ETF field. But soon after the first NETS began appearing in April 2008, Steven Schoenfeld told IndexUniverse.com that he saw plenty of room left for competition in ETFs. He's chief investment officer of the quantitative management group of Northern Trust Global Investments, which helped develop the funds.

He described introduction of the NETS' targeted approach and selection of indexes for the funds as providing more choice to investors. He believed as more products arrived on the market and individuals learned more, individual investors were still in the early stages of "allocating their assets in more segmented ways."

Northern Trust, Schoenfeld added, was taking a step-by-step approach to introducing its full set of ETFs. The firm established a plan to begin with more targeted portfolios for those already looking at gaining exposure to specific international markets. Then, presumably, would come the icing on its global cake.

"Clearly in the long run we believe in the product set we're developing," said Schoenfeld last year in the article (see here).

No doubt timing was a key to disrupting those plans. The economy has continued to fall. But Northern Trusts' slow, multitiered launch starting with niche country specific ETFs—leading up to release of its more all-encompassing, global portfolios—probably didn't help matters.

In the end, Northern Trusts' game plan left it with too few assets spread across too many ETFs.

The last day of trading for the existing NETS is set to be Feb. 9 on the NYSE Arca.

Any person holding shares in the Funds after the delisting date will receive a cash distribution equal to the net asset value of their shares as determined on Feb. 20, the date of liquidation.