Full Transcript for The ETF Graveyard: This Has Been a Record Year for Closures

the Westwood Engineered Beta Sector ETF. That's the WEBS ETF. Essentially, those are the equity counterpart to this. But instead of just being another Me Too sector ETF, they try to target volatility. So they would leverage up if their target volatility range was too low versus to their target. Or they would go to cash if they think that volatility is too high. And they launched 11 of them back in 2025. And every single one of them went in the graveyard this year. 00:06:00 Speaker 1: So they're in good company. You know, they're not alone. 00:06:02 Speaker 4: They have like their brothers and sisters beside them. So, you know, it's a family affair. 00:06:07 Speaker 1: That's nice. But they all closed. It's kind of sad when it's the whole family, though. 00:06:12 Speaker 3: I know. 00:06:13 Speaker 4: You don't want to be a survivor. 00:06:15 Speaker 2: You want to go with the crew. 00:06:16 Speaker 3: This is like Black Plague type stuff. Yeah, it's not friendly. 00:06:20 Speaker 1: Eric, take the flashlight and take us to another corner. 00:06:24 Speaker 3: Crane Chair's Global Luxury ETF. When I travel around, I will get this question once in a while. Isn't there a luxury goods ETF? And I'm like, there's been like three or four attempts. This has been Lazarus'd. like four times. 00:06:36 Speaker 1: It'll probably be again. 00:06:37 Speaker 3: I know. So we'll see. At some point, the luxury theme will work. I don't know when, and I don't want to the stars are aligned, but this thing was 69 basis points, only took in 2 million, but it's severely underperformed. So that's also an issue. 00:06:52 Speaker 2: I got a grave next to that one, by the way. 00:06:55 Speaker 1: Good segue. Next to the handbags, what do you got? 00:06:59 Speaker 2: Speaking of luxury, there is the iShares US Consumer Focused ETF, IEDI. I was a fan of these. This was part of, I think, the Evolved suite they did years ago, where they tried to kind of mix up the GIX sector with their own classification. So it was going to be, I believe, something like Apple was in there, right? Eric and I just got new iPhones. We spent a nice chunk of our wallet on it. Apple is a tech company by GIX, but by this measure, I believe, assuming it was in there, it was a consumer company. So BlackRock, iShares, they tried to shake up what is a real name in a sector now, right? Because the Some of these companies are crossing multiple boundaries, but it didn't catch on. 00:07:38 Speaker 1: Where would Tesla be? 00:07:40 Speaker 2: Probably in that U.S. consumer focus. But, you know, Netflix is not indiscretionary, but it's a consumer name. 00:07:49 Speaker 3: Right. 00:07:49 Speaker 1: Sounds a bit dramatic, right? 00:07:51 Speaker 3: They closed the Consumer Staples Evolve, too. I mean, I don't know. Did any of the Evolve make it? 00:07:56 Speaker 2: I think tech is the only one left. 00:07:58 Speaker 1: Yeah. Interesting. 00:07:59 Speaker 2: But they had Staples Healthcare, right? Like Managed Care Plus Toothpaste. 00:08:04 Speaker 3: Yeah, I remember those coming out. They were kind of like an answer to something. I think they were an answer to ARK. They were like, okay, we're going to make these more crossed gig sector things. Because ARK, when ARK came out, I think what it really showed people is gig sectors are a little rigid. And ARK was like, we'll give you innovation across two or three sectors. And that was a big deal. And everybody followed. And they realized, okay, wait, maybe gig sectors need to be updated. And I think that's when that came out. Then there was an explosion of theme ETFs, and there was just so much competition. 00:08:34 Speaker 2: Took it away. 00:08:35 Speaker 3: Yeah. 00:08:35 Speaker 1: One that I sorted by, and I thought this was interesting, the largest fund to close so far this year, Victory Shares West End Economic Cycle Bond ETF, BMDL. Anybody? Is there anything for being a big guy and falling on this list? 00:08:52 Speaker 3: No, nothing on there. 00:08:53 Speaker 1: Mystery. Just a death in the woods. Yeah. 00:08:58 Speaker 3: I want to say there was a $ 400 million ETF that closed one time. I think iShares closed alts, and that was pretty big. And somebody closed a commodity ETF. So that's not the largest closure ever, but anything over $ 50 million to me would be eyebrow-raising. Like, well, why would you close it? They must have their reasons. That said, $ 100 million is not that big of a deal, especially if you're a company that has billions. 00:09:20 Speaker 1: Which is what we're saying. Most of the ones that we're talking about here are much smaller than that. So this really comes down to, did you get assets or not? 00:09:30 Speaker 3: Not really. So there are some flows, but when you look at flows and you see just a random big giant bar and you see nothingness for months, that's BYOA. That is a line. 00:09:39 Speaker 1: Bring your own assets. 00:09:40 Speaker 3: Yeah, that's some in-house flow. Organic grassroots hits look like an uneven mix of like, it just looks more human and uneven. So this just looks like they had no actual interest beyond their own people. And that's probably why they closed. 00:10:04 Speaker 4: It. 00:10:09 Speaker 1: I'm curious, any particular themes that tanked? We talked about bonds a little bit. There's some more fixed income than not in here. Any other one? 00:10:18 Speaker 4: Let's go with leverage. So we spoke about this at the beginning, but leverage is just something that just seems to be the kind of useless calories that are just easy to get to. You eat them and you get rid of them really quickly. And that seems to describe leverage ETFs this year. We've had 93 of them close in so far this year. 00:10:36 Speaker 1: 93 out of 245. 00:10:36 Speaker 4: That's about 35% of the closures or something about there. My math is probably bad, but forgive me. So that's Pretty big. Like if you work it out, we've had about 27 closures every month. Leverage is responsible

for about 10 of them every month. 00:10:55 Speaker 1: So without leverage. 00:10:56 Speaker 4: We'd have 17 closures every month instead of 27. So let's look at leverage as kind of the failing theme for the year. 00:11:04 Speaker 1: I guess. But it's also like been there for some really big moments, right? So it's sort of like either you hit it and you find something that traders really want or not. 00:11:14 Speaker 4: Easy come, easy go. 00:11:15 Speaker 3: Yeah. Yeah, this is like the lottery for issuers. Because if you just get, let's say you launch 10, you get one or two to stick, you charge 1%, you're golden. So those eight were worth it. So this is the slickest spaghetti, the least likely to stick. 00:11:31 Speaker 2: Not everything needs leverage, but I get it. Just throw it out there. 00:11:36 Speaker 3: Most of these look like they're 2x stock. 00:11:39 Speaker 1: It's interesting. 00:11:40 Speaker 3: One of them is a 2x short micro strategy, which I would have thought would have had a nice run there for a minute. But even those... Sometimes that one probably is the third or fourth. So with leverage also, if you're not the liquid one, it's kind of like Ricky Bobby, if you're not first or last. If you're not the liquid one in that category, there's really not much else you can do. It's like, I don't really care if you're cheaper. This is the problem Corgis has. They have a ton of 2X and they're cheaper, but that crowd doesn't care about fees. So it's just, are you the liquid one? So if you're third or fourth, the odds of making it as a 2X are really tough. I mean, it's really hard. 00:12:14 Speaker 4: You see them like trying to innovate and do these weird things where it's like, oh, we're doing leverage on an options income ETF. 00:12:20 Speaker 1: Let's do that. 00:12:21 Speaker 4: These combining of the strategies and nobody wants this. 00:12:25 Speaker 1: Nobody wants this. 00:12:27 Speaker 3: That said, I remember when they were filed and we were like 2x NVIDIA, like who needs that? And that's like what, five, six billion dollars, 21%. That's 60 million a month, a year in revenue. So, you know, they got the last laugh. It has worked out. There's, multiple over a billion. So this is, the 2X stock space, actually leverage in general, is, I don't, it's a place you don't get a ton of respect. You know, like in the industry, it's like, oh, it's almost like you're selling contraband, like you're selling cigarettes or something. But you can make a ton of money because, you know, Vanguard will never play there and neither will BlackRock, neither will Schwab. Like all the Walmarts of the world are not, they're going to leave you be. And so it's very seductive for the issuers to do that. 00:13:11 Speaker 2: I think you'll see more culling of those lineups, but more piling into tech because that's where the assets are going. There's a 2X Starbucks. I'm drinking a pumpkin spice coffee right now. I don't need 2X of that. 00:13:24 Speaker 3: Yeah.

I mean, when a stock gets hot like Micron, nobody cared until that got really hot. Now that's a big deal. So sometimes you set them all out and you hope like the soccer ball gets kicked over to that area and you're like, okay, now it's our day. I would say the more volatile and techie, the better chances you have. But there is a world There is a scenario where 2x waste management could be like the hot new thing, you know, because we found that that stock tends to go up when AI falls. Because it's like garbage is the opposite of AI. 00:13:52 Speaker 1: Back to the graveyard. 00:13:53 Speaker 3: Yeah. 00:13:54 Speaker 1: Are there any asset managers or issuers who had a especially rough go here? 00:14:02 Speaker 3: I would say the 2x people stuck out. Trader, Defiance, T-Rex, and Bitwise. Bitwise closed like 9 or 10. A lot of like, they tried like crypto income. They went pretty wild and they have some good hits, but they probably, they launched a lot of stuff. So they culled their product line. 00:14:21 Speaker 2: Like the Dogecoin funds. 00:14:22 Speaker 3: Yeah, BWOW. 00:14:23 Speaker 2: Rest in peace, doggy. 00:14:24 Speaker 3: I know. 00:14:24 Speaker 1: Was that this year? Yeah. 00:14:27 Speaker 3: BWOW. 00:14:28 Speaker 1: BWOW. Which, yeah. 00:14:30 Speaker 3: Sounds like a 1989 rapper. 00:14:32 Speaker 1: Okay. Did anybody happen to note if there were any other golden tickers that died? 00:14:38 Speaker 3: I got a top five ticker closed this year. 00:14:41 Speaker 1: Oh, really? 00:14:41 Speaker 3: Top five. 00:14:42 Speaker 1: Toke. 00:14:43 Speaker 2: Toke. 00:14:44 Speaker 3: You know, I love verbs. 00:14:45 Speaker 1: I mean, walk us through it. Yeah. 00:14:47 Speaker 3: So this is the cannabis ETF from Cambria. Cambria also rarely closes ETFs. 00:14:52 Speaker 1: Wait, your selling point with Toke is that it's both verb and noun? Yeah. 00:14:57 Speaker 3: Yeah, and you know exactly what it does. Like, it just checks every box. 00:15:01 Speaker 1: Yeah. Like, moo. 00:15:02 Speaker 3: Right. Yeah. So, hack. Those are, like, it's hard to get all of that in one shot. Toke came out a little late. Cannabis has struggled. Has some good runs, but it largely has been a bummer. And it's weird. I just, I didn't mean to talk like the dude right there, but that's just appropriate. It's a bummer, man. Anyway, $ 13 million. This one was not quite a pure play. It had some cigarette companies. It was trying to capture the theme. I think it even had beer in here. I think the idea was to get a wider cannabis economy. The idea was great, but it was the sixth one to launch. The problem with doing economy ETFs and not pure plays is when the thing gets hot, this would lag. This would do better in a sell-off. It's almost like a lower beta version of a cannabis ETF, but Usually people who want the cannabis ETFs, they want that quicker, faster hit higher. 00:16:04 Speaker 1: Saw what you did there. 00:16:05 Speaker 4: That went up here high. 00:16:06 Speaker 2: Not bad. Can I bring up a blast from the past? 00:16:09 Speaker 1: Yeah. 00:16:10 Speaker 2: Another era. 00:16:10 Speaker 1: Take us to the other corner of the graveyard. 00:16:12 Speaker 2: The iShares Future Metaverse. Oh, Metaverse. And the Fidelity Metaverse ETF. What happened? 00:16:21 Speaker 3: Isn't that crazy? 00:16:22 Speaker 1: Well, it's called AI. We don't talk about the Metaverse anymore. We just talk about AI. 00:16:27 Speaker 2: No more metaverse. I think there's probably one or two still left over, but man. 00:16:31 Speaker 1: The only one that mattered is the one that you changed the name of your company for. 00:16:35 Speaker 2: That too. 00:16:37 Speaker 3: It is really wild. That was such a big word. 00:16:39 Speaker 1: It was a moment. 00:16:39 Speaker 3: Yeah. 00:16:40 Speaker 1: And we just don't talk about that moment anymore. Have you heard about our AI? 00:16:45 Speaker 2: So that fits in the thematic area. 00:16:47 Speaker 3: Of something that didn't work. 00:16:50 Speaker 1: Okay. Todd, any other surprising closes or noteworthy. 00:16:58 Speaker 2: I think given the environment we're in, Global X interest rate volatility and inflation hedge never caught on. But we have interest rate volatility right now. Inflation, it depends, I think, who you're talking to. It's certainly here in New York City. So that just comes as a peculiar one. I understand if it doesn't have assets, it's hard to keep going. But just in the bigger picture of what we're all dealing with in markets, I found that to be curious. 00:17:21 Speaker 1: Andre, closing thought? 00:17:23 Speaker 4: I think the winner of the closures for me would be Goldman. you'd think that with their acquisition of Innovator closing this year that they would have a large product line to close, but not really. They only closed three products as a result of that. So there was really just limited overlap. So it seems like their targeting was really good. So they closed their three buffer ETX, GBXB, GBXA, GBXC. I did that in the wrong order, forgive me. But that's the only three that they closed. And all they did was just say, hey, we got the Innovator lineup now. You could go to those buffers instead. So I think they were very smart with their acquisition, and it showed in their closures this year. 00:18:01 Speaker 1: All right, Eric, take us out of the graveyard. Final thoughts? 00:18:04 Speaker 3: One more would be Invesco minimum volatility ETF. It's minimum variance SPMV. This is ironic because this is some old school stuff here. Invesco had the low vol ETF, SPLV, huge hit. Then iShares followed with the USMV, which was a different way to do low vol. So Invesco was like, oh, okay. we need some of that too. So they tried to match iShares. Long story short, the whole low minimum vol complex has kind of died out a lot. It reminded me of currency hedging. I think the buffer ETFs really have hurt that category because why hope you get lower vol, probably get lower vol, lock

in lower vol with buffers. So we have a note or a theme we call that buffer ETFs kill the low vol star. So that's part of our theme. And also it's just interesting with SPLV was The original, this was trying to basically battle the other Me Too. Yeah, a lot going on there. 00:19:00 Speaker 2: I will still stand for lowball. I'm not giving up on it. I agree with the buffer thing. Because SPLV has no tech in this environment. 00:19:10 Speaker 1: That's it. 00:19:11 Speaker 2: If you need equity. 00:19:12 Speaker 3: SPLV just buys the least fall stocks. And you end up in the really boring sectors, like utilities and. 00:19:20 Speaker 1: Dirt. 00:19:21 Speaker 3: It's a dirt index, basically. The boomers who. 00:19:25 Speaker 3: In a huge sell-off, SPLV would go down too. It just would go down less. 00:19:29 Speaker 4: Yeah, but the flip side of that is that when tech rises, it gets none of that, so it just lags so much every other time. 00:19:36 Speaker 1: That's why it's dirt. 00:19:38 Speaker 2: You've got to carry the dirt. 00:19:38 Speaker 1: All right, I'm going to go around the room one more time. We're going to talk about the thing. If there was one product on this list that you think has a decent shot of coming back and, you know, getting out of the graveyard. Todd? 00:19:54 Speaker 2: How about the Advisor Shares Hotels ETF? That was B-E-D-Z. 00:20:00 Speaker 1: I remember this from COVID days, I think. 00:20:02 Speaker 2: Yeah, you know, like, still demand for travel. 00:20:05 Speaker 3: Mm-hmm. 00:20:06 Speaker 2: Maybe getting a little bit tougher because of rates in oil and whatnot now. But at some point in the future, those ideally will calm down. Good ticker. There's a proper way to do it. 00:20:14 Speaker 1: Okay. 00:20:14 Speaker 3: The themes natural monopoly ETF. By the way, the ticker is CZAR. C-Z-A-R. 00:20:22 Speaker 2: Pretty good. 00:20:22 Speaker 3: Pretty campy. But I do like this idea of wide moats. And I think monopoly is kind of an interesting way to name it. So I just, you know, maybe it won't be named monopoly, but I really like this idea of pricing power. So I could see something like that being resurrected. 00:20:38 Speaker 1: And Andre, what do you got? 00:20:39 Speaker 4: So I know I just kind of poo-pooed a little bit on leverage ETFs, but I actually think, you know, the ridiculousness of some of them kind of makes them something that would come back in the future. So I think the 2X agricultural commodity ETF, so that's C-O-R-X and W-H-T-X, that's 2X corn, 2X wheat. Might be a candidate for revival at some point in the future. 00:21:00 Speaker 3: Who knows? 00:21:01 Speaker 4: Maybe we'll enter an apocalypse and food will be scarce and we'll care so much about it. 00:21:05 Speaker 1: Let's go with that. All right. We'll leave it there. Todd, Andre, thanks for joining us on Trillions. 00:21:10 Speaker 2: Thank you very much. 00:21:11 Speaker 4: Thank you. 00:21:18 Speaker 1: Thanks for listening to Trillions. Until next time, you can find us on the Bloomberg Terminal, Bloomberg.com, Apple Podcasts, Spotify, or wherever else you like to listen. We'd love to hear from you. Hit us up. Trillions is produced by Magnus Henriksen and Keshav Pandya. Amy Keene is our executive producer. Cheryl Brumley is the head of Bloomberg Podcasts. 00:21:39 Speaker 3: Bye.