Fewer ETFs Closed in March as Stocks Rallied

Fewer exchange-traded funds closed in March than February, as funds were buoyed by investors putting money into rising stock markets. Still, 2024 is on track to top the number of funds that shuttered last year.

Eighteen ETFs liquidated in March, down 54% from the 39 funds that closed in February, and a decline from the 27 January closures, according to Bloomberg data. That's also a sharp drop from the 29 that closed in March, 2023.  Of the funds that closed, over half had fallen in price so far this year, underperforming the S&P 500, which had its best first quarter since 2019.

All the closures were equity funds, and they spanned categories including international, ESG and thematic funds such as the Subversive Mental Health ETF (SANE). 

This year is on track to break records for fund closures, even after last year’s record high. In 2023, closures hit a three-year high as 246 funds shuttered, up from 147 in 2022. Yet this year is on pace to see even more liquidations. In the first three months of 2024, there have been 83 closures, while during the same period last year there were 62.

As more and more funds are launched, an increasing number reach their roughly two-year mark where issuers tend to throw in the towel for ETFs that have seen lackluster investor interest or poor returns, according to etf.com analyst Sumit Roy.

Yet more funds continue to replace the ones abandoned as the ETF industry continues to grow to beat records for assets in funds. Last year saw a record 529 launches, up from 419 in 2022 and 475 in 2021.

Poor Performance Drives Closures

Underperformance is usually a key indicator of a fund’s closure, and the fund’s that shuttered in March fared poorly.

A majority of the fund’s that closed this month saw negative year to date returns year to date, while the S&P 500 Index has gained 11% over the same time period. The Simplify Tail Risk Strategy (CYA) saw the worst performance of the closed funds, as it was down 88% year to date.

A number of funds that closed due to poor performance were international-focused ETFs. The Global X MSCI Nigeria ETF (NGE), the VanEck Egypt Index ETF (EGPT), and the KraneShares China Innovation (KGRO)ETF all shuttered in March.

Contact Lucy Brewster at [email protected]