Potential investors should be aware that in rare cases a “termination fee,” which included legal fees and administration costs, could be tacked on if you hold on to an ETF until the bitter end.
According to an ETF Global “Watch List,” 59 funds that are less than 2 years old, have a minimum of $5 million under management and negative performance for the trailing 12-month period could raise their prospects for closure.
Moreover, there are other liquidity concerns in the fund industry. For instance, Deutsche Bank has suspended new creations on 26 exchange traded notes under the PowerShares DB brand. The suspension could create premiums or discounts to NAV.
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.