A record number of exchange traded funds have shut down this year but investment researcher Morningstar argues ETF closures are beneficial for investors due to fewer thinly traded funds, consolidated liquidity and more competition on fees.

Over 90 exchange traded products are expected to close in 2012. [Record Number of ETFs Closing This Year Amid Consolidation]

Meanwhile, 165 new ETFs and ETNs have listed this year, the second-fewest new launches in at least six years. Only in 2009 in the wake of the financial meltdown did fewer products begin trading at 136 for the year, according to Morningstar.

β€œIs the ETF industry simply maturing? We would say the answer to that question is, in a word, yes,” says ETF analyst Robert Goldsborough.

More competition

In the past five years, ETFs have tripled in number to 1,450 while assets have more than doubled to $1.3 trillion.

However, a fee war has broken out in the industry with BlackRock (NYSE: BLK) and Charles Schwab (NYSE: SCHW) among the firms slashing ETF expense ratios this year. Vanguard recently announced index changes at its ETFs that will allow it to cut costs for investors.

The business is known for being concentrated at the top with the three largest providers BlackRock, State Street (NYSE: STT) and Vanguard dominating market share.

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