'Hunger Games' erupts for ETFs as debuts slump to five-year low

The US$4.4 trillion market for U.S. exchange-traded funds is slowing down.

Asset managers set up fewer ETFs in 2019 than in any other year since 2014, data compiled by Bloomberg show. Some 225 funds traded for the first time during the past 12 months, down for a second-straight year. At the same time, fund closures spiked 35 per cent.

It’s a sign that a golden age for ETF issuance that’s fostered more than 2,000 products may be losing some of its luster. As management fees trend toward zero, fund issuers must look to uncharted areas for opportunities to woo assets and break out in a space where increasingly only the largest thrive.

“It’s ‘The Hunger Games’ out there,” said Ed Lopez, head of ETF product at Van Eck Associates Corp., referring to the dystopian survival competition that inspired several movies. “There’s just a ton of ETFs,” he said, adding “it’s harder and harder to be successful and to sustain an ETF through the early parts of its cycle.”

For years, asset managers took advantage of the mania surrounding the fast-growing ETF industry to pump out new products. Investors now have access to everything from real estate and gold, to convertible debt and Chinese equities, all through the ETF structure.