In short:
- An issuer may close an ETF, usually because assets are too small.
- The fund is then liquidated, or merged into another fund.
- Investors get the value of their units; closure itself does not cost them their capital.
- In a securities account, repayment is taxed like a sale. In a PEA, it is not, as long as the money stays in the plan.
Why an ETF closes
An ETF must cover its running costs. When it attracts too little money, the issuer may close it or combine it with a similar fund.
Liquidation or merger
| Scenario | What the investor receives |
|---|---|
| Liquidation | The value of their units, paid in cash |
| Merger | Units of another fund, of equivalent value |
| Sale before the last trading date | The market price, at a chosen time |
Consequences by account
In a securities account, repayment is treated as a sale. In a PEA, the cash stays in the plan and can be reinvested with no tax consequence.