“But for those concerned about ETF closures, perhaps there is an equally important criterion that should be considered, namely, which fund company sponsors the ETF in question,” Issakainen said.
If funds do not gather enough assets, fund providers may not find it profitable to keep the ETF. However, larger companies with deeper pockets may patiently wait it out until a fund becomes popular enough to generate sustainable profits.
For instance, this appears to be the case for the eight Global X ETFs that have already been closed down this year, and another eight tentatively slated for closure.
According to the ETF Industry Association, there were 1392 listed ETFs/ETNs as of January 2012, with $1.15 trillion in assets under management.
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.