I have made 3 very small purchases this week into an etf that opened in May and has an AUM under 4M. All were attempted for specific $$ amounts “at market”. Twice Fido posted a message (roughly stated): “Fidelity does not purchase illiquid securities. Please enter a limit order.”. I initiated a limit order and the trade went through quickly. But, interestingly, on the 2nd order (out of the 3) they put it through for the set $$ amount “at market”. The fund is GLDB - a weird blend of gold and corporate bonds which I’m sure nobody else would want to own.
- Question: Is it probable the reason for the designation of “illiquid” is based on the small AUM and a relatively small number of shares currently changing hands?
- Another detail: In reading the prospectus
I came across something of a disclaimer
stating that shares do not trade at NAV but that NAV is calculated at the end of each reading day. Is this typical of ETFs?
- The fund pays monthly interest & as with all my funds I’ve selected the “reinvest” option. It appears to be in effect. But I’m thinking they may not actually be able to reinvest the proceeds at market value if the fund is still considered “illiquid.” In that case, I’m confident the $$ will go into my core account. Might be a struggle reinvesting “chump change” into full or fractional shares?