Of course, the best-laid plans can benefit from luck too. HACK hit the market less than two weeks before before the revelation that Sony Corp.’s computer network had been hacked, a breach later attributed to North Korea.

Big Backers

Among those funds that failed to replicate HACK’s success and are now shuttered are HealthShares dermatology and wound care ETF, Global X’s fishing industry ETF and a fund focused on companies headquartered in Oklahoma.

Large issuers are wading into the niche ETF business in a different way, by creating specialized funds built around social and environmental issues that are backed by major institutional investors. State Street started the SPDR SSGA Gender Diversity Index ETF, which has the ticker SHE. It tracks companies that prioritize putting women in their leadership ranks and has accrued $270 million in assets since its March launch, following a $250 million investment from the California State Teachers’ Retirement System. And low-carbon ETFs started by BlackRock and State Street have been seeded by the United Nations Joint Staff Pension Fund, which has more than $46 billion in assets.

This helps explain why Chanin believes the environment is getting increasingly challenging for small firms that are trying to be creative with their fund offerings.

‘Buyer Beware’

“It will be more competitive for brand new issuers to come to market and try to take on market share,” he said. “Unless you’re a previously-existing, well-known issuer, entering the ETF arena there’ll be more hurdles from the issuer side for new startup ideas.”

For retail investors, it’s important to tread carefully with boutique funds, according to Rich Messina, head of investment products at E*Trade Financial Corp. The funds should only occupy a small fraction of an investor’s overall portfolio, he said.

“It’s buyer beware,” Messina said. “If they’re looking for an opportunity and they’re not using diversification -- it’s those types of investors that I would get concerned about.”

Of course, what’s considered a niche can change over time too. While a gold-focused fund may have seemed novel 10 years ago, gold ETFs have become practically mainstream investment vehicles, said Shundrawn Thomas, head of Northern Trust’s Funds and Managed Accounts group. State Street’s SPDR Gold Shares fund has $39 billion in assets and VanEck’s Vectors Gold Miners ETF has $10 billion in assets, respectively.