By Wes Crill, Dimensional Fund Advisors
Last year saw the closure of 224 exchange-traded funds—the second most in history behind only the year 2020. This is notable for a couple of reasons. First, it’s a reminder that ETFs are not impervious to attrition, highlighting the importance of evaluating portfolios based on the underlying investment approach and how it aligns with an investor’s long-term goals. And ETFs catering to flavor-of-the-month themes are less likely to stand the test of time.
The mass closures also provide an opportunity to eulogize some memorable tickers in the space. These are a handful of my favorites:
LJIM: RIP to the ETF composed of Jim Cramer’s recommendations. It’s ironic this one was outlasted by SJIM, the ETF shorting his recommendations.
TUNE: The music industry-themed ETF shut down after just a few months of operation. I don’t think they can blame Napster.
GENY: Is a work tenure of seven years on brand for a millennial-themed ETF?
BAD: Maybe investors were disappointed that this ETF had nothing to do with Michael Jackson’s album. The fund closed before the December holidays, which seems ill-advised for a “sin stock” strategy.
MEME:The meme stock ETF’s creators apparently felt demand for this ticker would be to the moon, but the tendies never came.1
Fund closures have been a fixture in the mutual fund space over the last 20 years. That might be a preview of what to expect from ETFs over the next 20.
Source: Dimensional Fund Advisors.
Footnotes
1. “To the moon” and “tendies” were common slang expressions used on message boards during the meme stock craze in 2021. They refer to a large increase in value and profits, respectively.
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