Recent articles have outlined a list of exchange traded funds (ETFs) that are on a “deathwatch” for 2009.

Ron Rowland for Seeking Alpha notes 97 ETFs and 42 exchange traded notes (ETNs) that were in danger of closeing. The list includes ETFs and ETNs that are at least six months old and have an average daily value traded of less than $100,000 in the month of December.

The primary reason that some ETNs are suffering is because of concerns of default risk.  The bankruptcy of the once mighty Lehman Brothers resulted in the demise of three ETNs and has really taken its toll on investor confidence in the industry. As for ETFs, it is believed that too many were introduced too quickly, they were designed poorly and are suffering from investor overload and market failure.

As we all know, not all new products are a hit or a success. In fact, they are all exposed to what Charles Darwin deemed as natural selection and the failure of a few products is not a bad thing or a death knell for the industry in general. But do understand that ETF providers put in a lot of time and careful research before launching a product, and the hope is always there that it will do well. Unfortunately, the truth is that not everything can succeed.

A number of ETFs closed last year and the closings went off without a hitch. ETFs are going to continue to grow in popularity despite the potential failure and closure of funds provided by the aforementioned providers.

Tags: ETNs