Does The Restaurant ETF Closure Signal Trouble For Other Niche ETFs?

On December 9th, ETF Managers Group announced that it was closing the Restaurant ETF (NASDAQ:BITE). The fund launched with a fair amount of interest in October 2015 as the first ETF to focus solely on the restaurant industry. It was thought that the trend of steadily increasing household spending on eating out would result in strong performance for restaurant stocks attracting investor dollars. Investors never became interested in the product though. The fund will shutter later this year with only around $1.5 million in total assets.

 

I've been a critic of the trend of launching increasingly narrow-focused ETFs for a while. For every PureFunds Cybersecurity ETF (NYSEARCA:HACK), there are a dozen funds like the Restaurant ETF that never catch on. While it's nice having a product available that gives you access to such a narrow slice of the market, it feels more like a gimmick than actual investing strategy. Even the Cybersecurity ETF, one of the most successful ETF launches lately, has seen its assets under management drop significantly from its peak over a year ago.

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