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XShares Advisors to liquidate remaining HealthShares exchange-traded funds


The board of directors of HealthShares, a provider of specialist exchange-traded funds manager by XShares Advisors, has decided to liquidate its four underlying investment portfolios liste

The board of directors of HealthShares, a provider of specialist exchange-traded funds manager by XShares Advisors, has decided to liquidate its four underlying investment portfolios listed on NYSE Arca at the end of the year, after the failure of a revamp carried out barely two months ago.

The HealthShares board said it took the decision after considering current market conditions, the inability of the funds to attract significant market interest since their launch, and prospects for their future viability and ability to attract investors’ assets.

‘We continue to believe in the fundamentals of the health care industry,’ says XShares Group chairman and chief executive Joseph L. Schocken. ‘Unfortunately under these tough market conditions, the funds were unable to achieve meaningful investor traction. We remain strongly committed to bringing our products now under review to market. In 2009, we expect to launch additional products related to the environment and infrastructure.’

December 23 will be the last day of trading for the shares of the HealthShares Cancer Exchange-Traded Fund, HealthShares European Drugs Exchange-Traded Fund, HealthShares Diagnostics Exchange-Traded and HealthShares Drug Discovery Tools Exchange-Traded Fund on NYSE Arca, and the last day on which creation unit aggregations of the shares may be purchased or redeemed.

NYSE Arca will halt trading in the shares of the funds before the open of trading on December 24, and the funds will be closed to new investment on that date. Shareholders may sell their shares on or prior to December 23. All shareholders remaining on December 31, will receive cash equal to the amount of the net asset value of their shares and will not incur transaction fees. Other costs of closing the funds will be borne by XShares.

The process of liquidating the fund portfolios has already begun, meaning that they will no longer pursue their investment objective of tracking the performance of its respective underlying index.

The redesigned range of HealthShares ETF began trading on NYSE Arca as recently as October 21, following changes in the composition of their underlying indices resulting in them holding a greater number of constituent companies (originally all the HealthShares funds were equally-weighted and contained 22 stocks) but with generally higher minimum capitalisation requirements. XShares also lowered the funds’ expense ratios to between 0.60 and 0.72 per cent.

Schocken said at the time: ‘These four ETFs have demonstrated significant investor interest since their launch, and continue to offer health-care investors sub-sector exposure that might otherwise be difficult to obtain. While we’ve increased the number of stocks in these ETFs, they still provide focused exposure to their market segment, but do so with greater diversification.’

The reorganisation followed the closing of 15 HealthShares funds earlier this year. Following the relaunch, HealthShares Diagnostics had USD20m in assets, HealthShares Cancer and HealthShares Drug Discovery Tools had around USD10m each and HealthShares European Drugs a bare USD2m.

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