Kevin Paffrath, a financial influencer with over 2 million YouTube subscribers, is closing his Meet Kevin Pricing Power ETF at the end of this month. 

Tidal Financial Group, which issued the exchange-traded fund in November 2022 with the ticker PP, made the announcement and cited the fund’s underperformance and mounting operational expenses as the primary reasons for the closure.

The fund managed to accumulate $32 million in assets but lagged the S&P 500 by approximately 26 percentage points during its lifetime, Bloomberg reports.

Paffrath, known online as “Meet Kevin,” estimates losses of $1 million from running the fund, despite charging a management fee of 0.76% – higher than the 0.69% industry average for actively managed U.S. ETFs. 

“I took on too much. I need to get back to balance. I made a mistake expanding into too much too quickly. I’m sorry,” Paffrath wrote on X.

The fund’s holdings include approximately 12 stocks, such as Rocket Cos Inc. and Yelp Inc., alongside a leveraged Treasury ETF.

Industry Economics Present Barriers to Entry

According to Citigroup Inc. analysis, cited by Bloomberg, between one-third and half of the roughly 3,900 U.S.-listed ETFs likely cannot cover their annual operating costs. The analysis assumes funds face fixed costs between $200,000 to $350,000, plus up to 7.5 basis points in variable costs.

Michael Venuto, co-founder and Chief Investment Officer at Tidal, pointed out that active managers face additional compliance costs beyond standard ETF maintenance expenses. Despite these challenges, financial influencers and prominent money managers continue to enter the ETF market.

The closure highlights broader industry trends, as active funds have attracted only approximately one-quarter of the $1.2 trillion that flowed into ETFs over the past year. Paffrath’s fund reached peak assets of about $50 million, which, as Bloomberg reports, the YouTuber indicates was near the threshold for financial viability.

In contrast, some new entrants have found success. Financial analyst Tom Lee’s Fundstrat Granny Shots US Large Cap ETF, launched in November, has gathered approximately $900 million in assets and slightly outperformed the S&P 500, despite charging a 0.75% management fee.

Paffrath, who sells investment courses through his website, created the ETF hoping to establish a lasting legacy rather than launching a meme coin. Following this experience, he advises against starting a fund for those seeking profitability.

“It shows how hard it is to raise money, even if you have a lot of followers,” stated Athanasios Psarofagis, Bloomberg Intelligence analyst. “At the end of the day, the thing that matters is performance. Performance trumps everything.”