From Barron's Focus on Funds:
Fund company PowerShares “temporarily suspended” share creations in nearly a dozen commodities and currency exchange-traded funds on Wednesday as it assumes full responsibility for those funds’ management.
The suspension affects 11 ETFs including the $4 billion PowerShares DB Commodity Index Tracking Fund (DBC) and the $1.2 billion PowerShares DB Dollar Index Bullish Fund (UUP), and curtails the ability of specialized dealers to create new ETF shares, possibly increasing investors’ trading costs.
PowerShares said it will “work quickly” to file necessary paperwork
with Securities and Exchange Commission and National Futures Association
to allow for normal functioning. PowerShares is the fourth largest U.S.
ETF provider and a unit Invesco (IVZ). In October, the company said it would take over complete responsibility for the funds, which had been run jointly with Deutsche Asset & Wealth Management. PowerShares had previously been in charge of the ETF suite’s marketing and distribution.
In the ETF market, so-called authorized participants work
continuously to create and destroy shares to align an ETF’s market price
with the value of its underlying securities. If no mechanism exists to
create new shares exists, the funds’ prices have potential to veer away
from their net asset values, like a closed-end fund. In other words:
beware....MORE
