“They are in a sense half-dead. Their growth just hasn’t developed the way their creators hoped,” Peter C. Andersen, chief investment officer at Congress Wealth Management, said in the article.
More recently, Global X announced that it is shutting down eight of its smallest ETFs, seven of which were on Rowland’s deathwatch. [8 ETFs Closing]
Small and thinly traded ETFs may come with a number of problems. For instance, investors may get stuck with taxes on capital gains if a fund is liquidated, and they may receive poor selling prices in the days leading up to liquidation as the spread between bid and ask prices usually widen.
The total number of ETFs is small compared to the number of mutual funds, which was 7,581 at the end of 2010 with $11.8 trillion in assets, according to the Investment Company Institute’s 2011 fact book.
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.