Shutter Island: ETFs In Danger Of Closing

ETF Database

The ETF industry has been experiencing exponential growth over the past few years, as we are now able to choose from more than 1,400 products with well over $1 trillion in combined assets. But as with any budding industry, there comes a time when it is necessary to trim the fat so to speak, and upkeep the quality of options available. As a result, the past few months have seen a fair amount of funds close that simply failed to attract investor attention [see also Doomsday Special: 7 Hard Asset Investments You Can Hold in Your Hand].

While no issuer enjoys shuttering a fund, it is simply a growing pain associated with such a young industry. As the number of ETFs available continues to skyrocket, so too will the number of funds that are no longer useful or popular among the investing world. When most investors hear that their ETF position is soon to close, they are struck with panic and contemplate selling out immediately. An ETF closing is not necessarily a bad thing, just more of a hassle. When a fund closes, investors are given their money back; however, selling prematurely can sometimes lead to bigger losses than simply holding on to the fund until liquidation [see also How To Survive An ETF Liquidation].

Closing Time?

ETFs closing their doors is a necessary evil. Nonetheless, it is an occurrence that will likely become more common as the industry continues its rapid expansion for years to come. After examining the current state of the industry, we have developed a list of 15 equity funds that may be in danger of closing. Our criteria for this list was limited to funds that were more than two years old, with AUM under $5 million, and a three month average daily trading volume below 2,000 shares. While it is by no means a guarantee that these funds will close down, they are certainly circling the drain as far as their lifespan is concerned. Below, we list the equity funds that may be in danger of being terminated by their respective issuers if they cannot attract more attention and inflows [see also The 10 Most Actively Traded ETFs In The World]:

Ticker ETF Assets (In Millions) Avg. Volume Inception Date
 RPX Growth Equity Strategy Fund  $1.489  1,554  10/12/2009
 EEH SPECTRUM Lg Cap U.S. Sector ETN  $1.495  1,055  08/01/2007
 SMK UltraShort MSCI Mexico  $1.938  892  06/16/2009
 JPX UltraShort MSCI Pacific ex-Japan  $1.963  1085  06/16/2009
 AXFN MSCI ACWI ex US Financials Sector Index Fund  $2.189  553  01/20/2010
 FEFN MSCI Far East Financials Sector Index Fund  $2.434  217  01/20/2010
 EEN EW Euro-Pacific LDRs ETF  $2.714  1,024  03/01/2007
 GWO CS Global Warming ETN  $2.848  1,926  04/01/2008
 GVT Concentrated Large Cap Value Strategy Fund  $2.961  827  05/04/2009
 FGEM Financials GEMS ETF  $3.217  1,577  09/16/2009
 KME SPDR KBW Mortgage Finance ETF  $3.631  913  04/29/2009
 UWC Ultra Russell3000  $4.393  1,078  06/30/2009
 PSTL Global Steel Portfolio  $4.425  1,002  09/18/2008
 QQQC NASDAQ China Technology ETF  $4.740  1,937  12/08/2009
 BXDB Barclays Short B Leveraged Inverse S&P 500 TR ETN  $4.822  1,450  11/17/2009

Disclosure: No positions at time of writing.

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