The death of ETFs: Over 1,000 ETFs died in 2019, but what happens with funds that don’t work
Not only are cryptomorphs „dying“ because they are „useless“, ETFs are also killed for lack of profitability
Halloween may be over, but let’s take this opportunity to talk about a bit of a dark theme: Zombie ETFs.
Although the cryptomaniac community is looking forward to a Bitcoin approved ETF in the US, hundreds of ETFs „die“ every year without generating the expected returns.
For Paulo Kulikovsky, Director for Latin America at Stake, a global investment platform that connects the U.S. stock market to people around the world, it is important to understand the movements of this type of asset.
ETFs, or Exchange Traded Funds, which in Portuguese are known as investment funds, which are constituted with the objective of investing in a portfolio of shares that seeks to replicate the portfolio and the profitability of a given reference index (Nasdaq,NYSE, ibovespa, among others).
Hundreds of ETFs „die“ every year because they are not able to generate the promised returns, ultimately returning the money to investors.
More than 1,000 ETFs closed in 2019 alone, a fact financial analysts say is good for the market.
„Even though in the short term this can cause some loss to investors, if we look at the situation with a more macro view, this is positive because it gives a „clean slate“ on the ETFs that did not perform well. And that makes investors feel more confident in better known funds“. says Kulikovsky.
The main index funds are saturating the market, leaving little room for options that are not so well known.
The closure of these funds frees up the markets for unprofitable ETFs.
One of Stake’s most popular closures, the $TVIX, was one of the most famous closures in history.
It is not known what the real reason for the closure was, but the speculation is that CreditSuisse, which managed the fund, did not want to bet on a 2x ETF leveraged in volatility, that is, maximizing profitability through a kind of indebtedness and thereby increasing risk, especially in a year like 2020.
Hashdex, a Brazilian manager approved by the Brazilian Securities and Exchange Commission, CVM, announced that, in partnership with Nasdaq, it has obtained approval to negotiate a Bitcoin ETF and cryptomoedas.
The Hashdex ETF with Nasdaq will be traded on the Bermuda Stock Exchange.
The launch was the world’s first cryptomede ETF and marks an important achievement for the adoption of Bitcoin in the institutional market.