AMSTERDAM- A record number of exchange-traded funds in Europe are set to close this year, a report by financial data provider Refinitiv said on Tuesday, as challenging conditions pressure profitability in the broader asset management industry.
Refinitiv's "ETF deathlist" includes 31 ETF portfolios it identifies as being at risk of closure as they were unable to gather more than 10 million euros in assets under management at least once in the last three years.
The largest ETFs on the list include two U.S. equities funds from VackEck, a Japanese equities fund from Lyxor and a U.S. dollar global bond fund from First Trust.
With more than 250 ETF portfolios shut already in 2020, this year could see the highest number of closures since the sector's inception in 2000, according to the report by Detlef Glow, Lipper Head of EMEA Research at Refinitiv.
The high number of closures comes even though assets under management have actually increased 0.5% year-to-date.
That may look small for a growth industry, said Glow, but it should be considered in the context of more than 46 billion euros outflows from underlying markets.
Traded like stocks, ETFs offer liquidity in different asset classes and have become a one-stop shop for investors in recent years against a backdrop of slow economic growth, ultra-low interest rates and low volatility in financial markets.
Credit rating agency Moody's cited all those as well as the impact of the coronavirus pandemic and trends within the industry on Tuesday in a report on the global asset management sector that foresaw a gloomy outlook for 2021.
Glow said a possible reason for the closures might be a lack of profitability, given the challenges the industry is facing.
Even bond ETFs struggled as market liquidity evaporated during the broad pandemic sell-off in March, with investors forced to sell out at much lower prices than the value of the funds' underlying holdings.
"As overall assets under management and flow patterns for the year looked quite healthy, it is not (to) be expected that the industry is in a consolidation mode," he wrote in the report.
"From my point of view, the high number of ETF closures in Europe goes in line with high launching activity. Since not all of the new products end up meeting investor expectations, they are closed after a period of time."
(Reporting by Yoruk Bahceli; Editing by Catherine Evans) ((Yoruk.Bahceli@thomsonreuters.com; +44 20 7542 7571; Reuters Messaging: email@example.com))