FlexShares Announces Liquidation of an Exchange Traded Fund
- None.
- The termination of the FlexShares ESG & Climate Emerging Markets Core Index Fund may disappoint investors who were interested in ESG-focused investments.
Insights
The liquidation of the FlexShares ESG & Climate Emerging Markets Core Index Fund (FEEM) is a noteworthy event for investors and market participants. The decision to close a fund often reflects underlying challenges such as insufficient assets under management, lackluster performance, or a strategic shift by the fund's managers. In this case, it may indicate a reassessment of the viability of niche ESG funds within emerging markets, which can be more volatile and less liquid than developed markets.
From a financial perspective, the liquidation process involves selling off the fund's assets and distributing the proceeds to shareholders. This can have tax implications for investors, as capital gains distributions may occur. Additionally, the timing of the liquidation, close to the trading day, is essential to minimize market impact and ensure the best possible outcomes for investors.
For the broader ESG investment landscape, this liquidation might signal a consolidation trend where only funds with significant scale and differentiation survive. This could lead to a more competitive environment with potentially better outcomes for investors in terms of fees and fund performance.
Emerging markets are often seen as fertile ground for ESG investments due to their potential for rapid development and improvement in governance and sustainability practices. However, the closure of the FEEM fund suggests that the appetite for such investments may be more limited than previously thought, or that the fund was not able to effectively capitalize on these opportunities.
It's important to assess the competitive landscape of ESG funds targeting emerging markets. The failure of one fund could be due to its own shortcomings or a more systemic issue within the sector. The liquidation might also reflect investors' preference for ESG funds with a broader mandate or those that are part of a larger, more established family of funds.
Understanding the market dynamics and investor sentiment towards ESG in emerging markets is important for other fund managers and financial institutions. They might need to adjust their strategies, improve transparency, or enhance their value proposition to attract and retain investors.
Environmental, Social and Governance (ESG) criteria are increasingly important for investors and the liquidation of the FEEM fund could be indicative of the challenges specific to implementing ESG principles in emerging markets. These markets often face governance issues, less stringent environmental regulations and social challenges that can complicate ESG investing.
An ESG Investment Strategist would examine the methodologies and criteria used by the FEEM fund to assess how it integrated ESG factors into its investment process. The fund's inability to attract enough capital might suggest that its ESG strategy did not align with investor expectations or that it failed to communicate its ESG value effectively.
Moreover, this event could prompt a reevaluation of ESG scoring systems and their applicability to emerging markets. It may highlight the need for more localized and nuanced approaches to ESG analysis that account for the unique challenges and opportunities in these regions.
Upon the close of business on or about April 19, 2024, the Fund will discontinue accepting orders for the purchase of creation units. Trading of the Fund’s shares will be suspended prior to the open of regular trading (i.e., 9:30 a.m., Eastern time) on the NYSE Arca on April 24, 2024. Accordingly, the final date of trading of the Fund’s shares on the NYSE Arca will be April 23, 2024. Shareholders may sell their shares on or before the Close of Trading on April 23, 2024, and may incur customary brokerage charges associated with such sales.
Shareholders who do not sell their shares on or before the Close of Trading on April 23, 2024, will receive cash equal to the amount of the net asset value of their shares calculated as of the close of business on the Closing Date. Proceeds of the liquidation are currently expected to be sent to shareholders on or about April 30, 2024. Those shareholders remaining in the Fund on the Closing Date will not be charged any transaction fees by the Fund, but the net asset value of the Fund on the Closing Date will reflect trading costs associated with the sale of portfolio securities of the Fund.
If Fund shareholders sell their shares or receive a liquidating distribution, it is generally considered a taxable event and they should consult their tax advisor about the potential tax consequences.
About FlexShares
FlexShares Exchange Traded Funds are designed to pursue specific investment goals across both passive and active strategies. FlexShares offers differentiated ETF strategies that can improve and simplify the investment decision process for the long-term investor. Visit us on FlexShares.com.
About Northern Trust Asset Management
Northern Trust Asset Management is a global investment manager that helps investors navigate changing market environments in efforts to realize their long-term objectives. Entrusted with
Northern Trust Asset Management is composed of Northern Trust Investments, Inc., Northern Trust Global Investments Limited, Northern Trust Fund Managers (
About Northern Trust
Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. Founded in
Northern Trust Corporation, Head Office: 50 South La Salle Street,
Before investing, carefully consider the FlexShares investment objectives, risks, charges and expenses. This and other information is in the prospectus and a summary prospectus, copies of which may be obtained by visiting www.flexshares.com. Read the prospectus carefully before you invest.
Foreside Fund Services, LLC, distributor. FlexShares and Foreside are not related.
An investment in FlexShares is subject to numerous risks, including possible loss of principal. Fund returns may not match the return of the respective indexes. A full description of risks is in the prospectus. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns. An ESG investment methodology that includes and excludes issuers and assigns weights to issuers by applying non-financial factors, such as ESG factors, such ESG investment methodology may underperform the broader equity market or other investment products that do or do not use ESG investment criteria.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240405152609/en/
Doug Holt
312-557-1571
Doug.Holt@ntrs.com
Source: Northern Trust Corporation
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