ETF closures follow clear patterns – from break-even thresholds to the typical fund lifespan. If you know them, you can better assess the risk of liquidation before you buy.
• In 2025, 146 active and 86 passive ETFs were liquidated in the US
• In the previous year 2024, the US closures totaled 187 ETFs
• The average life of closed-end U.S. active ETFs was 1.75 years in 2025
How common ETF closures really happen
ETF liquidations are not rare exceptions, but a regular market process. As the Morningstar report “Active ETF Launches and Closures: 2025 in Review” from February 2026 shows, around 230 ETFs were liquidated in the USA in 2025, of which 146 were active products and 86 were passive products. In previous years, according to Morningstar, the total closure numbers for US ETFs were 187 for 2024, 226 for 2023 and 190 for 2020. Triple-digit closures per year are therefore not an exceptional phenomenon, but a market reality.
In Europe the number is significantly lower, which is mainly due to the younger and more concentrated market structure. As Morningstar documents in its report “Europe’s Active ETFs: More Choice, More Complexity” from October 21, 2025, closures in the European active ETF segment have so far remained rare, although researchers attribute this primarily to the young age of the market, not to a fundamentally higher level of stability. According to the same Morningstar analysis, the average lifespan of liquidated European ETFs is around four years. In the USA, the picture is much more brutal: the active ETFs closed in 2025 had an average lifespan of around 1.75 years.
Which ETFs carry increased closure risk
The reason behind every ETF closure is usually the same: lack of profitability. In its analysis, Morningstar puts the typical annual fixed costs of a US ETF at around 250,000 US dollars, which, as is customary in the industry, consists of index license fees, custodian costs, auditing, stock exchange listings and regulatory obligations such as prospectuses and investor information. With an average management fee of 0.75 percent, this results in a break-even volume of around $33 million. Of the 150 ETFs liquidated in the U.S. in 2025, according to Morningstar, only six had more than $50 million in assets at the start of the year, with most under $25 million. This results in a simple rule of thumb: If an ETF remains permanently below 50 million euros, the risk of closure increases significantly.
A second risk factor is strategy. In the US market, niche and short-term strategies were particularly affected in 2025: of around 340 newly launched short-term active ETFs, many are leveraged products, inverse strategies or single-stock ETFs. For German investors, this specifically means: Thematic ETFs on narrowly defined sectors such as cybersecurity specialists, crypto topics or factor combinations with small investor interest are closed more often than broadly diversified global equity ETFs on the MSCI World or the FTSE All-World. Added to this is age: Even in the European market, the lifespan of liquidated funds is an average of four years, which supports the rule of thumb that ETFs are only considered established on the market after at least five to seven years.
What German investors can specifically expect in the event of liquidation
If an ETF launched in Germany that runs under the European UCITS regulations, usually abbreviated as UCITS in English-language ETF marketing and based on EU Directive 2009/65/EC, is dissolved, the requirements of the Capital Investment Code apply. These ETF shares are legally considered special funds. As can be seen from Section 99 Paragraph 1 KAGB, the capital management company must terminate the management of a special fund with a notice period of six months, whereby the termination must be announced in the Federal Gazette and documented in the annual or semi-annual report. Investors must also be informed immediately on a durable medium, i.e. by letter, email or comparable electronic message. Investment conditions can provide for longer notice periods, but shorter ones only apply to special funds, i.e. not to classic public ETFs for private investors.
After the notice period has expired, the special fund will be wound up in accordance with Section 100 KAGB. The depositary takes over the realization of the securities contained and the payment to the shareholders at the respective liquidation price. Two points are practically relevant for investors. First: The sale in liquidation is considered a sale for tax purposes; the profits are taxable in accordance with the withholding tax if the saver’s flat rate has been exceeded. This can lead to financial disadvantages due to lost tax deferral. Second: The liquidation price depends on the price of the assets included on the settlement date, which can lead to unfavorable timing in volatile markets. Anyone who sells well before the deadline can choose the timing themselves and thus retain flexibility in terms of tax optimization and reinvestment. Whether the provider alternatively merges the ETF with another product, which can be done tax-neutrally under certain conditions, depends on the investment strategy and domicile.
Three things to check before buying a potentially at-risk ETF
Investors can assess closing risk before purchasing in three steps. Firstly, the fund volume: If the fund is permanently below 50 million euros, it is close to the economic viability threshold, which Morningstar uses US data to place at around 33 million US dollars. With small volumes, providers are more likely to consider closing because the management fee no longer covers the fixed costs. Second, fund age: Morningstar data shows that actively closed US ETFs had an average lifespan of 1.75 years, and European closures typically occurred after four years. Anyone who chooses products that have been on the market for five to seven years or more significantly reduces the statistical probability of closure.
Third, the strategy: Broad global indices with high inflows historically show the lowest closure rates, while sector, theme and factor products are disproportionately affected by liquidations. For active investors who consciously build niche allocations, it is worth diversifying across several providers and constantly monitoring the fund volume. If a closure notice is found in the Federal Gazette or on a permanent data medium, there is sufficient time for an orderly reaction due to the six-month period according to Section 99 KAGB, be it by selling at the desired time or by reinvesting in a comparable, broader product.
Dominik Maier, editorial team at finanzen.net
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