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There are more exchange traded funds than ever, and they’re being sliced increasingly thin.
Last year, 217 exchange traded funds were launched—a record amount. And this year is equally hot so far, with 36 new ETFs coming on board in January and February, according to Morningstar.
March's tally isn't in yet, but another 700 to 800 new ETF issues are in the pipeline, says Michael Johnston, a senior analyst at ETF Database. “Not all will see the light of day,” he adds.
Many of these newly minted ETFs stake out razor thin sectors in booming niches like emerging markets, precious metals, yield and non- U.S. dollar-denominated debt , thanks to a crowded market. Such offerings can mean low trading volume—or even death—as they compete for investors.
Other ETFs are cashing in on red hot trends, say experts.
Take the FirstTrust Smartphone Index , which debuted in mid-February. Much awaited, the 74-stock fund was initially priced at $30, but slipped below $27 a month later. On top of that, its expensive ratio was double the average ETF’s, according to Black Rock.
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