Lesson: Even promising products can die without the right marketing muscle.
iShares Diversified Alt Trust (ALT), 2009-2013
This closure surprised the ETF world. It was the first iShares ETF to close in over a decade. It had more than $50 million in assets, much more than some other iShares ETFs that the company kept open. But ALT was a costlier, more actively managed, hedge-fund-style ETF that invested in long and/or short positions in foreign-currency forward contracts and exchange-traded futures contracts. iShares said it saw little long-term demand and made the move to cut its losses. As the world’s largest ETF issuer, iShares took some of the stigma and shame out of closing an ETF.
Lesson: The big guys make mistakes, too.
Focus Morningstar Large Cap (FLG), 2011-2012
FocusShares, a subsidiary of Scottrade, came into the ETF market like one of those "Price Is Right" contestants who bid one dollar more than the highest bid. FocusShares offered many of its ETFs at expense ratios one basis point less then the cheapest product. It offered many plain-vanilla products that already existed, such as U.S. small-, mid- and large-cap ETFs. Investors never warmed up to these “me too” products.
Lesson: It’s not enough to be the cheapest.
Global X Fishing Industry (FISN), 2011-2012
The ETF that inspired such headlines as “Fishing for Profits” and “Don’t Take the Bait” folded pretty quickly after attracting only $1 million in assets. This ETF had the bulk of its holdings in Japan and Norway, which are home to a lot of large commercial fishing, fish farming and fish processing operations.
That narrowness may have doomed the ETF, but the timing of the launch didn’t help. It came out right after the March 2011 earthquake, tsunami and Fukushima power plant disaster. The ETF lost 25 percent in its first six months out of the gate. If FISN had stuck around, it would have gained approximately 31 percent in the past year, thanks largely to the rally in Japanese stocks.