When funds are liquidated, it is in most cases due to their size. There are a few things that investors can do to avoid risking their assets.
In the past few years, hardly any financial product has had a career as steep as that of the exchange-traded index funds, the so-called ETFs (Exchange Traded Funds). They follow the strategy of replicating the market via an index, such as the S&P 500 or the Dax, in the portfolio and thus also their performance. Actively managed funds are less and less able to keep up with the low-cost ETFs, which means that more and more active funds are being closed. In the first half of 2019 there were 4,287 in number.
But more and more ETFs are also being liquidated. The finance portal “Bloomberg” recently reported that a record 58 ETFs were closed in the first six months of the year. Even in 2009, a year after the financial crisis, the number was lower with 44 closed funds. The data from the fund analysis company Morningstar even speak of 140 dissolved ETFs. The main reason why more and more funds are being liquidated is the tough competition for fees. According to the report, the liquidated ETFs paid an average of $ 6.20 in fees for every $ 1,000 invested. Around 70 percent of all inflows into ETFs came from those with fees of less than $ 1. Again and again, providers reduce costs in the hope of gaining market share. There are now even providers like Salt Financial who pay investors to invest in their products, even if this promotion only applies to the first year.