Fund closure trends starkly different in Canada, U.S.

Over the past 10 years, U.S. mutual fund launches have fallen significantly as fund closures have ramped up, according to data from Morningstar Direct. But a similar trend isn’t happening in Canada.

U.S. mutual fund closures totalled 2,036 from Jan. 1, 2013 to Dec. 16, 2022, according to Morningstar, the equivalent of 50.6% of mutual funds launched (4,023) over the same period.

Meanwhile, U.S. ETF launches rose steadily from 2013 to 2021, followed by a small dip this year. ETF closures were relatively steady over the past decade but spiked in 2020. ETF closures from 2013–2022 (819) were the equivalent of just 27.8% of ETFs launched over the same period (2,942).

Here in Canada, the number of mutual fund closures actually fell every year between 2015 and 2021, with no funds closing in 2021. Only one mutual fund closed in 2022 (as of Dec. 20).

Canadian mutual fund closures totalled 349 from Jan. 1, 2013 to Dec. 20, 2022, the equivalent of 17.9% of the 1,947 mutual funds launched over the same period.

Canadian ETFs fared better, but only slightly. The 140 ETF closures over the past decade were equivalent to just 15.6% of the 899 ETFs launched over the same period. Closures peaked in 2017 and have dwindled since.

Previous Morningstar research has shown that thematic funds are particularly vulnerable to closure over long periods.

“For example, about half of Canadian thematic funds survived and outperformed the Morningstar Global Markets Index over the trailing three years through December 2021,” stated the Morningstar Global Thematic Funds Landscape 2022 report, released in March. “Their success rate drops to less than 20% over the prior five years.”

The report noted that investors face “formidable challenges” when “selecting a thematic fund that will survive and outperform global equities over longer periods.”

Source for all charts: Morningstar Direct. Canadian data to Dec. 20, 2022; U.S. data to Dec. 16, 2022.

Melissa Shin

Melissa is the editorial director of Advisor.ca and leads Newcom Media Inc.’s group of financial publications. She has been with the team since 2011 and been recognized by PMAC and CFA Society Toronto for her reporting. Reach her at mshin@newcom.ca. You may also call or text 416-847-8038 to provide a confidential tip.