In any industry, there are going to be success stories and not-so-success stories. Recent closures in the exchange traded fund (ETF) industry highlight the challenges that small providers, in particular, face.
While the ETF industry is growing in general, it’s not growth across the board.
Ari I. Weinberg for The Wall Street Journal reports that there’s a trend at work that’s offsetting some of that growth. Smaller entrants into the ETF space are finding it tough to lure investor money, leading them to close up shop. [ETF Closures Are Not Affecting Industry Growth.]
Year-to-date, 129 new ETFs have launched. Some of them already have more than $100 million in assets. Over the same period, though, 37 funds have shuttered. [5 Things That Make An ETF Right For You.]
In 2008 and 2009, sponsors closed 50 and 51 ETFs, respectively.
These closures are not a statement about ETFs, rather they are an example of the challenges that face providers. As the industry grows, it’s becoming more competitive. While this has been great for investors, allowing them to get the best product at the best price, providers are under more pressure than ever to both launch unique ideas and wield their marketing heft. [Your ETF Is Closing. Now What?]
Newcomers that have made the biggest splash in this current climate are often established names, such as PIMCO, ETF Securities and Charles Schwab.
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. 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.