What would you do if you exchange-traded fund provider contacted you to say it was closing your fund? The possibility might not be as remote as it sounds - according to fund data group Lipper, there are 241 ETFs in Europe with less than €100m under management that are vulnerable to closure.
These funds, identified by Lipper from among the 1,711 ETFs registered for sale in Europe, are all older than three years, rather than new launches. The existence of so many sub-scale funds raises the prospect of consolidation in the ETF industry after years of break-neck expansion.
However, Lipper says that assets under management are not on their own a valid measure to evaluate the profitability of an ETF. Other reasons might drive the decision-making of fund promoters. For example, some ETFs on the death list have been launched for marketing reasons or to complete product ranges.