Welcome to the abyss of ETF oblivion. It’s an unfriendly place where exchange-traded funds (ETFs) with marginable assets, minimal trading volume, and zero interest from investors reside.
Ameristock Treasury ETFs have become the latest members of the abyss too. Not enough people invested in them, so Ameristock’s management took a clue from the Ford Edsel and halted production.
In February the same thing happened to Claymore Securities. The company pulled the plug on 11 underachieving ETFs.
For anyone that thought the ETF business was just about press releases, cute slogans, and flashy new product launches, it’s time to think again.
Fund providers are getting smarter. Who needs funds that follow indexes or investment strategies that no one cares about? And what’s the point of managing asset-starved ETFs that can’t be supported with product education or marketing dollars?
Sometimes, innovation has to yield to reality. Just ask John DeLorean.
Low expense ratios are good for investors, but bad for fund companies. It’s one of the enduring truths of any asset-management business. For this reason, the ETF business is probably one of the last places enterprising companies and entrepreneurs intent on hitting the jackpot should explore.