If a fund has a small amount of funds under management or FUM (meaning, the amount of money invested in the ETF), it risks being closed by the fund manager.
Here at Best ETFs Australia, we consider any ETF with less than $100 million invested to be a higher than normal risk of being closed. However, there are many variables to consider:
- Is it a lower-cost ETF (under 0.5% in yearly management fees)? If so, it'll need more FUM to be profitable.
- Is the ETF issuer a major provider of ETFs? If they are not 'one of the big guys', the ETF department could be closed if it fails to become profitable.
It's important to remember that if an ETF closes, the ETF investor will typically receive a notification from the ETF issuer and can elect to sell the ETF prior to its closing, or opt to receive his or her money back from the ETF after it closes.