As of the beginning of February, we have seen just four exchange traded products with announced and/or actual closings for the year, significantly below the annualized levels of the most recent years. While the trend of these recent years certainly suggests that the rate of closures will increase in order to regress to the mean, an increase may be more directly supported by the simple fact that the month of February, with 91 products on the list, achieved another new high in the overall number of ETPs on the Monthly Liquidation Watch List.
The February Liquidation Watch list is dominated by equity and commodity ETPs, accounting for 39 and 28 on the list, respectively. There are also 12 fixed income ETPs, eight currency ETPs and four multi-asset ETPs that round out the February report. While equity products may dominate this month’s Liquidation Watch List in absolute numbers, the commodity ETPs certainly represent a far greater relative percentage of their respective asset class. There are more equity funds within the ETP universe than commodity products.
In looking more deeply at what has driven the behavior of the Liquidation Watch, a few interesting trends have emerged. The number of eligible products that have been in existence for more than two years has increased slightly but has stayed around 1,200. With elevated asset levels and markets just off all-time highs in certain cases, the number of ETPs with less than $5 million in assets under management is actually one of the lowest levels that we have seen in several quarters.
So the growth in the number of products on the list is a direct result of the swelling of products with negative trailing 12-month performance. Interestingly, the number of ETPs with negative performance has not only been elevated in recent months but also reached an all-time high this month of 621 ETPs. This represents approximately 40 percent of the 1,539 ETP universe that we cover.