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For the month of July, the ETF Deathwatch increased in size. Twenty-four exchange-traded products (\u201cETPs\u201d) were added to the list, and 19 funds were removed, making July a busier month in terms of additions. Of the removals, 16 were removed due to increased health and three were due to asset managers closing their funds.<\/p>\n
July was a perplexing time for domestic equity markets, so the high number of funds that were added to the Deathwatch in July was not surprising. Many of the additions were index-tracking ETFs. Some of these additions may be due to a delayed response to the market correction that occurred in May.<\/p>\n
For July, the additions were mostly equity ETFs from a variety of sectors and styles. Of the additions this month, three were added because their AUM was consistently below $5 million for three months. The rest were added due to low average daily volume. These additions may have enough AUM to keep them from closure; however, our system takes into account both AUM and volume, so it\u2019s likely that should volume and interest remain low, these funds may be considered for closure. The low volume in these funds for the month could be due to the market\u2019s reaction to current events. Investors may have been waiting for a better time to buy or sell these assets.<\/p>\n
The number of equity ETFs added to the Deathwatch list for the month wasn\u2019t surprising. The increase in trade tensions between China and the U.S., in addition to the Federal Reserve\u2019s quarter-point interest-rate cut, made July a tricky month to navigate. The presence of a broad range of sectors and styles on the Deathwatch list\u2014including emerging markets, developed markets, large caps, mid caps, and small caps\u2014shows the broader equity market has been struggling to sustain the 2019 rally. Money managers may have chosen this time to get out of equity indexes to avoid further risk from increasing trade tensions. As money managers allocate to safer holdings, the average daily trading volume in equity-index ETFs is bound to decline.<\/p>\n
There are 46 ETFs and ETNs on Deathwatch this month that have been in the market for more than 10 years. This is a long time for ETPs to exist while remaining on our Deathwatch list. Leveraged and short ETF instruments, as well as a number of commodity ETPs, dominate our list of funds older than 10 years. It\u2019s possible that the fund companies managing these products will allow them to remain active, as they play a larger role for clients who are interested in active management.<\/p>\n
The average asset level of the threatened ETFs on ETF Deathwatch decreased from $7.68 million to $7.47 million, and 53 products had less than $2 million in assets. The average age of products on the list decreased from 47.75 months to 47.74, and the number of products more than 5 years of age increased from 115 to 119. The largest ETF on the list had an AUM of $24.77 million, while the smallest had assets of just $462,000.<\/p>\n