Product deletions have been rare in the world of exchange-traded funds (ETFs), thanks to the industry’s incredible growth in both new products and investor assets over the past several years. Nevertheless, the recent demise of the SPDR O-Strip illustrates the cold reality of the cutthroat business.
After a relatively short run of two years on the market, it was apparently time to pull the plug on the O-Strip as of September 13, the day that SSgA Funds Management, which served as the fund’s investment advisor, vowed would be the product’s last day of trading on the American Stock Exchange.
With anemic fund assets of nearly $5 million and low daily trading volume, it had been clear for some time that the SPDR O-Strip didn’t have a very bright future. “From the perspective of the issuer, ETF expense ratios tend to be very low, making assets under management an even more important factor,” explains Alexander Reiss, vice president of ETF research at New York City-based Ryan Beck & Co. “They can only make a profit if they hit certain asset thresholds.”