Should the market pull back, many exchange-traded funds will likely be shut down, financial advisers tell The Wall Street Journal. Investment advisors have been so quick to bring new ETFs to market that all the major indexes have been exhausted—leaving them no other recourse but to bring forth increasingly esoteric ETFs based on miniscule segments of the market.
“What I am seeing is a rapid shift from ETF evolution to ETF pollution,” said Richard Ferri, CEO at Portfolio Solutions.
“ETF closings could come as the [fund’s] investment philosophy loses its shine after a market pullback,” agreed Herb Morgan, president of Efficient Market Advisors. “It will be no different than the traditional fund business, with smaller poor-performing funds being merged away or closed.”
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