Are ETPs Launching Just to Close?

Are ETPs Launching Just to Close?

So far this year, there have been 99 new exchange traded products launched, but about half that amount (53) have closed. The numbers indicate that the origination of new ETPs may in fact be creating too many ETFs in the marketplace and therefore a heightened risk of closures.

The ETF Global ETP Liquidation Watchlist, posted on ETF Global’s website and, provides a good idea for which funds may be at risk. On this watch list, ETF Global highlights those ETPs that carry a higher risk of closure in the near future. Specifically, we identify all exchange traded products that hold below $5 million in assets under management, have existed for at least two years and had negative performance for the trailing 12 months. The list this month includes 61 listed names that fit these criteria.

This year’s new product launches are diverse and span many asset classes and objectives. Here is a quick table reflecting some high level statistics for 2013 YTD:

2013 YTD                       (as of 10/1/13)


Number of Issuers with new ETPs


Number of Commodity ETPs


Number of Currency ETPs


Number of Equity ETPs


Number of Fixed Income ETPs


Number of Multi Asset ETPs


Total AUM from 2013 New ETPs

$5.67 B

Largest New ETP  (FIGY)

$1.24 B

In looking at these statistics, two primary trends emerge within the new ETP equity space this year.

The first, not exactly a new one, is the focus on high dividend yield. Since interest rates have been so low for such an extended period of time, it's no surprise that there has been such a great demand in the market place for alternative income. We expect continued interest in this space, but all high dividend ETPs are not the same. You can check out their ETFG Tearsheetand Red Diamond Risk Ratings.  

The second trend is what we will broadly call volatility managed. This category includes the popular low or minimum volatility products and the more recent “buy-write” strategies that focus on selling calls or puts to generate income and hedge risk. Keep an eye on this group as they have the potential to help investors decrease risk in their portfolios.

In fixed income, we see more globally focused and actively managed ETPs coming to market. There also has been a large push, mainly from BlackRock, into the target maturity ETFs. This space was made popular by Guggenheim's BulletShares. These products allow investors greater control in managing the duration of their portfolios. As the investors try to understand and anticipate “taper on/off,” they can express that view in a granular fashion with these target maturity products.

Do these products satisfy new, additional, incremental demand from investors? Maybe this is the natural product evolution within this space that simply replaces the older, less relevant ETPs with newer more progressive ones?

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