It's been a busy August for closures in the exchange-traded fund industry, what with Scottrade's FocusShares, Direxion and Russell Investments announcing plans to pull the plug on a collective total of 49 ETFs.

FocusShares LLC, an affiliate of discount broker-dealer Scottrade, announced earlier this month that its family of 15 exchange-traded funds would be liquidated by month's end. The funds were touted for their dirt cheap expense ratios (between 0.05% and 0.19%), and their closure comes less than 18 months after they were launched. The Focus Morningstar ETFs, which were based on Morningstar domestic equity indices, held roughly $100 million in assets in aggregate.

According to the company, the funds failed to attract sufficient assets to remain viable going forward.

Likewise, Direxion earlier this month said it planned to close nine leveraged and inverse ETFs on September 5 due to lack of investor interest.

As for Russell, the index provider said it will shutter 25 passively-managed ETFs with about $310 million in assets. The company cited challenging equity market conditions as the reason for the closures.

The fast-growing exchange-traded products industry had nearly 1,500 offerings as of the end of July. Some of them are redundant, particularly on the passive index side. And some funds targeting very niche corners of the market are struggling to attract assets. Some investors have wondered if the ETF space is due for a correction.

According to two industry watchers, the recent closures are more a pruning of dead wood than a sign of wholesale future retrenchment.

"Closures tend to come in waves," says Ron Rowland, founder and editor of the Invest With An Edge website and weekly newsletter covering ETFs, stocks, and mutual funds. He puts together an "ETF Deathwatch" list of funds he believes are in trouble due to lack of assets or lack of trading activity.

"I think part of that is fund sponsors using other closures for cover [to close their own troubled funds]," he says.

Rowland says that fund closures are a natural part of the industry's evolution, and praises such companies as Direxion, ProShares, PowerShares and Guggenheim for their willingness to close funds that don't generate sufficient investor interest.

"Others make it a badge of honor that they've never closed a fund," Rowland says. "Great, you're allowed to lose as much money as you can in order to keep your pride."

Todd Rosenbluth, ETF analyst at S&P Captial IQ, rightly notes that along with this month's closure announcements came the usual flurry of fund registration filings from a host of different fund sponsors. And he says that none of the Big Three providers--iShares, State Street and Vanguard--have filed for any closures.

In Russell's case, the company is still in the ETF game because its indexes underlie a number of funds. "Russell's ETFs were competing against ETFs they were supporting," Rosenbluth says.

As Rosenbluth sees it, investors still like some of the tried-and-true strategies that have traditionally fueled the ETF industry's growth. "Money is still gravitating toward the more traditional ETFs tied to widely-known indices such as the S&P 500, MSCI EAFE or Russell 1000," he says. S&P Capital IQ, of course, is affiliated with S&P's various indices.

--Jeff Schlegel