Bursting of Pandemic-Stock Bubble Fuels Big Wave of ETF Closures
The notoriously saturated $7.7 trillion ETF industry is this year poised for the second-highest number of closures, as the pandemic-era day trading boom fizzles out.
As of the first week of December, exchange-traded-fund issuers had liquidated or delisted 234 products in 2023. That compares with 159 closures last year and just 72 in 2021.
Of the total closures this year, more than 10% were thematic ETFs, according to a tally from Bloomberg Intelligence. Many of those funds — which typically appeal to retail traders looking to invest in buzzy concepts — had launched during the pandemic.
The list of funds axed includes seven focused on cryptocurrencies and the digital-asset ecosystem. At least two metaverse ETFs and two investing in blank-check companies also shuttered, as did a fund tracking companies like Pfizer Inc. and Moderna Inc. that develop Covid-19 vaccines.
Part of the problem for issuers looking to gain a foothold in the ETF arena is that investors now have the choice between 3,300 US funds spanning different asset classes and strategies. More than 700 of those funds came to the market in 2021 and 2022, many of them catering to day traders who were particularly active in the throes of the pandemic, according to Athanasios Psarofagis, ETF analyst at Bloomberg Intelligence. With retail trading less frenetic these days, it makes sense to see many funds shutter, he said.