ETF issuers weigh closures as launch pace heads for new record

Exchange-traded fund issuers are bringing products to market at a record clip, and many now say deciding which funds to shut down has become as pressing as deciding which ones to build.

Some two-thirds (65%) of ETF issuers surveyed by Cerulli Associates named the balance between product development and product rationalization – the industry’s term for closing or merging funds that fail to earn their keep – as a leading concern. That outranked shifts in investor demand and product differentiation, cited by 61%, and market volatility and macroeconomic uncertainty, at 35%.

The findings from Cerulli’s latest research report on US ETFs come as the industry churns through products at an unusual pace. Cerulli counted 733 ETF launches and 145 closures in the first half of the year, putting both measures on track to meet or surpass recent records.

Separate data from ISS Market Intelligence show the momentum carried through the third quarter. Long-term fund launches across all vehicles reached 1,255 by the end of September, equal to 94% of 2025’s full-year total of 1,331. Active ETFs made up 933 of those, or 74%, extending a run in which active ETFs have dominated US product launches.

Closures are also on the rise. Active ETF liquidations and mergers totaled 159 through September, already above the 127 recorded in all of 2025, according to ISS. Single-stock funds accounted for 77 of those exits, nearly half, after 290 single-stock active ETFs launched over the same nine months.

Read more: Active ETFs reshape how advisors build portfolios

Why ETF issuers pull the plug

Cerulli found 88% cite a lack of assets as a factor in rationalization decisions, and 69% point to weak demand from key distribution partners. Only 38% name an ineffective investment strategy, and just 13% cite the lack of a first-mover advantage.

The results indicate a fund doesn’t have to stumble on investment grounds to be closed, according to Cerulli. It can be shut simply because it lacks a credible path to assets and platform support.

“Early adoption, asset growth, and differentiated products can provide signals of a potentially successful ETF, but they do not guarantee success,” said Kevin Lyons, an associate director at Cerulli and the report’s lead author.

“Both market conditions and investor preferences can change quickly, so ETF issuers must continually evaluate their ETFs on multiple fronts, including asset growth, performance, pricing relative to their competitors, distribution traction, and demand from clients,” Lyons said.

Where issuers are building next

Pipelines remain tilted heavily toward active management. Some 94% of issuers responding to Cerulli are developing (82%) or planning (12%) transparent active ETFs, while 72% have no plans for new passive cap-weighted funds and none are working on semi-transparent active ETFs.

Roughly 37% are developing dual-share-class products, which add an ETF share class to an existing mutual fund, even though advisors have been lukewarm on dual-share-class ETFs. ISS counts five firms that have launched products around the structure since the Securities and Exchange Commission began approving it late last year.

Read more: The ETF evolution: unlocking the future of investment opportunities

Fixed income is another target, as issuers expect advisors’ growing familiarity with bond ETFs (71%) and more attractive yields (67%) to drive flows over the next two years. Only 5% see end investors buying directly as a key factor.

“Successful issuers will be defined not by the number of ETFs they offer, but by their ability to identify strategies with credible client demand and distribution support, act when that path no longer exists, and redirect resources toward future growth," Lyons said.