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Shutter Island: ETFs In Danger Of Closing

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]:

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.

Click here to read the original article on ETFdb.com.

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