One-Third of U.S. ETFs Hold Under $50M, FactSet Finds

FactSet analysis shows that about one in three of the 5,072 U.S. exchange-traded funds it tracked had under $50 million in assets and generated less than $1 million in revenue as of March 31. The research says the rate of ETF closures has not matched the pace of new launches, leaving many small, low-revenue products on the market.

The analysis was authored by Elisabeth Kashner, vice president and director of ETF research and analytics at FactSet, in a paper titled “Low-Asset ETFs Are Due for a Reckoning.” Kashner wrote that the imbalance has produced what she called an overabundance of small ETFs and urged a period of industry “spring cleaning.”

Market observers point to several factors that make small ETFs vulnerable. Fund closures typically follow extended periods of low assets and revenue because managers need scale to cover operating costs and to justify distribution. Some platforms apply minimum performance or asset thresholds, often over a roughly three-year period, before adding or retaining funds on their menus.

If market volatility increases or if economic conditions weaken, analysts say it may become harder for niche and newly launched funds to attract inflows. When small ETFs close, capital commonly moves into larger, established funds and issuers may shift resources toward new strategies or different product structures.

Todd Rosenbluth, head of research at VettaFi, wrote that “ETF closures are healthy for the industry,” noting the market now includes more than 5,000 ETF products and that asset managers continue to introduce new strategies.

For investors and financial advisers, the data underline the need to evaluate new ETF launches on their ability to attract assets and generate revenue over time. Some platforms delay listing new ETFs until they clear an initial asset-gathering period.

FactSet’s findings have prompted market participants to watch asset flows and revenue trends at smaller ETFs and to monitor whether broader market conditions accelerate consolidation among low-asset funds.