Geary Advisors, the firm that last year pioneered state-specific ETFs, has announced that it will close down the Oklahoma Exchange-Traded Fund (OOK) and Texas Exchange-Traded Fund (TXF) by the end of the month. Both funds launched in late 2009, but despite impressive performances struggled to build up assets and trading volumes. OOK seeks to replicate the SPADE Oklahoma Index, a benchmark consisting of publicly-traded companies whose corporate headquarters are located in Oklahoma or who maintain significant operations within Oklahoma. Though OOK’s assets are spread across a number of sectors, the fund maintains a heavy tilt towards firms engaged in the transport of natural gas. That made it an intriguing option for playing that corner of the energy market, but assets were slow to accumulate.
Similarly, TXF is linked to a benchmark, the SPADE Texas Index, that consists of companies headquartered in Texas. Not surprisingly, TXF maintains a tilt towards the oil and gas sector, and includes allocations to several large cap energy stocks. Since inception, OOK and TXF had outperformed the S&P 500 SPDR (SPY) and Energy SPDR (XLE) by fairly wide margins. But the impressive share price performance wasn’t enough to attract significant assets, and trading volume thinned in recent weeks. Keith Geary, in an e-mail to ETFdb, wrote:
I am disappointed that the expected outperformance of OOK and TXF as compared to other investment options since their launches last Fall and their rightful place in the Markets, was lost by actions and activities outside my control.
Geary joins WisdomTree, Claymore, Grail, and Rydex as ETF issuers to pull products off the market this year; OOK and TXF will be the 29th and 30th ETFs to close in 2010. But the story behind the shuttering of the Texas and Oklahoma ETFs may be one of the most bizarre twists in recent memory.
According to The Oklahoman, Geary CEO Keith Geary believes that the lack of interest in his firm's products may have been related to his testimony in a court case last year. Geary testified last June on behalf of Frontier Bank, which had challenged an FDIC cease-and-desist order claiming the bank was operating its leveraged assets program in an unsafe manner. He wrote in an e-mail to the paper:
I have reasons to believe the FDIC has repeatedly reached out to a variety of government entities and business relationships that I am involved with for the sole purpose of discrediting and ruining me financially and professionally.
September 24 will be the last day of trading for shares of OOK and TXF; shareholders as of September 30 will receive cash equal to the net asset value of their shares. Geary has agreed to pay all expenses related to the winding down process.
Disclosure: No positions
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