The ETF boom is producing a growing number of casualties. Fund providers have shut down 217 exchange-traded funds so far this year, nearly double the number at this point last year, even as the industry churns out new funds at a record pace.

The closures are in part a consequence of the explosive growth of the ETF industry, with asset managers launching funds that sometimes fail to attract enough assets or otherwise gain traction.

Investors have flocked to ETFs in recent years because of their low costs, the ability to trade them easily like stocks, and the proliferation of funds offering exposure to everything from memory chips to the burgeoning space economy.

Fund providers aren't slowing down the pace of new ETF offerings. "Last year, more than 1,100 new ETFs entered the market and now we're on track to break that record by the end of 2026," said Tom Campbell, head of Americas ETF distribution for Goldman Sachs Global Banking & Markets in a recent presentation.

More than 700 new U.S. ETFs launched in the first half of the year, according to CFRA Research. At the same time, fund providers are shutting down existing ETFs at a much faster pace than in recent years.

The 217 ETFs closed so far this year compare with 119 through mid-August last year, according to data from ETF.com. There were 138 closures during the same period of 2024, 159 in 2023, and just 58 in 2022.

The closures have hit funds from some of the industry's biggest players, including BlackRock's iShares and Invesco, as well as crypto-focused firm Bitwise and leveraged ETF providers Leverage Shares, GraniteShares, and Direxion.

A spokesperson for BlackRock said "we regularly assess how our funds are meeting the evolving needs of clients and the long-term structural shifts reshaping economies and capital markets," adding that decisions to liquidate products are based on multiple considerations, including client demand and feedback from investors.

Some of the iShares funds that have closed focused on consumer stocks, the metaverse, and fixed income, for example. BlackRock has done similar ETF pruning in early to mid-August for the past two years.

An Invesco spokesperson said fund closures are a normal part of managing a broad ETF platform and allow the firm to focus resources on areas where it sees the greatest opportunity to meet investor needs. "Invesco regularly evaluates our products to ensure they align with client demand and our long-term growth priorities," the spokesperson said.

Matt Hougan, chief investment officer at Bitwise, told Barron's that "closing ETFs is a natural part of a healthy ETF product management cycle" and that the company expects "to launch additional ETFs in the future."

GraniteShares founder and CEO Will Rhind told Barron's that "the rise in ETF closures needs to be viewed alongside the record number of new ETFs coming to market."

"Not every new product will achieve the investor adoption or scale needed to remain viable," Rhind added, saying that GraniteShares is "comfortable taking calculated risks and bringing innovative ideas to market," but "that also means being disciplined enough to close a fund when it has not gained sufficient traction."

Direxion declined to comment on its ETF closures, and Leverage Shares did not respond to a request for comment.

So what should you do if an ETF you own is shutting down? Emily Doak, director of ETF and index fund research for the Schwab Center for Financial Research, said in a report that ETFs rarely close at a moment's notice.

That means you typically have two options: sell as soon as you find out the fund is being closed and move on to something else, or wait to receive a cash payout after the ETF is liquidated.

"Selling your shares before the closure date allows you to reinvest more quickly because the standard settlement for ETFs traded on national exchanges is just one business day," she said. "You'll likely receive the bid price when you sell, which is generally slightly less than the value of the fund's underlying investments."

Doak added that investors should also remember that an ETF liquidation can come with a tax bill.

"ETF closures are treated like sales and may create unexpected tax consequences if the ETF was held in a taxable account," Doak said. "If you've owned the fund for less than a year and it closes at a higher share price than you paid, you could owe taxes on any short-term gains, which are taxed at ordinary income rates."

Keep that in mind if an ETF you're invested in has the plug pulled on it. Fund providers are shutting down funds at a much faster pace these days.