ETFs are nearing the highest number of closures ever this year as buzzy concepts go bust
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- With 234 nixed funds so far, 2023 is already seeing the second-highest number of ETF closures, Bloomberg reported.
- That's as the day trading boom of 2021 has fizzled out and the ETF industry remains saturated.
- Still, ETF launches have not stalled, clocking in at 450 so far this year, up from 378 last year.
Exchange-traded funds are seeing the second-largest number of fund closures this year and are closing in on the all-time record.
The number of ETF issuers liquidating or delisting products hit 234 in the year to date, Bloomberg reported, just 17 short of the record 251 closures three years ago.
Several of the funds that were nixed grew out of hype seen during earlier market frenzies, with seven focused on cryptocurrencies and digital-assets while at least two were metaverse ETFs, according to Bloomberg's tally.
Another reason axed ETFs are rising in number is because of an uptick in ESG-related fund closures. Those ETFs have seen $7.7 billion in outflows, shuttering 14 ESG funds this year.
Following a boost of day trading in 2021 as everyday investors streamed into the stock market, ETF launches rocketed by almost 50% in a year, up to 370. The ETF industry is now a stunning $7.7 trillion.
But that day trading boom has petered out, and it's hurting an overly saturated ETF market. There are now a total of 3,300 US funds for investors to choose from, with over a thousand of those funds have been launched in the past three years alone.
But the ETF bubble hasn't burst entirely.
In spite of the closures, there have been 450 products launched so far in 2023, up from 378 last year. That includes last month's debut of the HRTS fund — tracking obesity drug development following the Ozempic craze — and zero-day options ETFs.
Active ETFs, where underlying assets are managed by the issuer, comprised 80% of the ETFs launched in the past year. They have gulped a record share of 25% out of the $500 billion that has flowed to US ETFs in the past 12 months.