One in seven ETFs on ‘death watch’

ETF_tradingOne in seven European exchange-traded funds (ETFs) may be under review by their providers and threatened with withdrawal if they do not gain more inflows.

The estimate comes from Detlef Glow, head of research in Europe, Middle East and Africa for data firm Lipper.

He says there are 241 funds on sale in Europe that are more than three years old and have less than €100 million in assets, out of a total market of 1,711. These funds are assumed to be at risk of closure because it is likely that their management fee revenue does not cover their running costs.

However, Glow conceded that ETFs do not only earn money through management fees. There are also creation and redemption fees to consider.

In addition, being unprofitable does not always mean a fund will be closed. Some providers continue to operate unprofitable ETFs to maintain a full product set or for marketing reasons.

Glow's figure is a rough estimate only, as the level of assets a fund needs to be profitable varies depending on the structure and fee arrangements of the fund. Jim Ross, head of State Street's ETF business, told Funds Europe in an interview that some ETFs need a large amount of assets while others can get by on much less.

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