Surviving the Game
Investors paying attention to the fund management landscape likely recognize the paucity of mutual funds surviving for the long term. What they might not have realized is that attrition similarly afflicts ETFs. The population of 1,656 equity and fixed income ETFs available at the start of 2018 dropped by around 4% per year; 311 funds (about 19%) closed by the end of 2022. By comparison, a nearly identical proportion of the mutual funds (1,071 of 5,559 or about 19%) went obsolete over the same period.
ETFs continue to attract massive flows. But the survivorship stats suggest that investors should carefully consider whether the underlying investment strategy of an ETF will last the length of their investment horizon.
Source: Morningstar. Starting sample includes all US-domiciled mutual funds and ETFs in the broad category groups “Equity” or “Fixed Income” available as of 1/1/2018. Surviving funds are those whose last reported return falls on or after 12/31/2022.
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