Small exchange traded funds (ETFs) may dissolve in the market slump, regardless of higher past performance. Of the roughly 650 ETFs that exist now, 200 were rolled out in the past two years, and not all of them can gather enough assets fast enough for long-term survival, says Paul Mazzilli for Morgan Stanley.
It’s like anything else, though. Not everything can be a success 100% of the time. It’s about giving investors choices and letting them make decisions as to what’s right for them and their portfolios.
The approximate lower limit for an ETFs long-term life is at around $75 million and anything under that isn’t enough to cover costs. Around 150 ETFs exist with less than $10 million and have only been on the market for a year, reports Jesse Emspak for Investor’s Business Daily.
Mazzilli says that most successful ETFS build their assets quickly and while there will be more ETFs folding, such as the 11 Claymore funds, firms will still keep coming up with ideas. The investors ultimately decide which ones will be a success.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.