FocusShares is shutting down its four exchange-traded funds, after almost a year of existence, and almost no market traction.

In announcing the shuttering, FocusShares didn't say what its future plans are at this point. The ETFs set to close represent the company's only funds. Calls to Erik Liik, the company's chief executive, weren't immediately returned early Tuesday morning.

FocusShares has several ETFs currently in its pipeline and in various stages of registration with the Securities and Exchange Commission. 

The four ETFs, launched in December 2007, had amassed a total of $17 million in assets at the end of September, and had net outflows year-to-date of $5 million, according to National Stock Exchange data. The four funds, which all trade on NYSE Arca, will liquidate on October 20. The funds are:

• FocusShares ISE Homebuilders Index Fund (SAW)
• FocusShares ISE SINdex Fund (PUF)
• FocusShares ISE-CCM Homeland Security Index Fund (MYP)
• FocusShares ISE-Revere Wal-Mart Supplier Index Fund (WSI)

The total number of exchange-traded products now stands at 813, and as the market has become more saturated, the niche approach to product launches has run into life-threatening issues.

The first-mover advantage may still be an important factor in the ETF industry, but it is becoming clear than some ideas, even with the first-mover advantage, just don't make sense to enough investors, in the first place. Take the XShares ETF family, for example, where 15 ETFs that traded in Real Estate and Health care subsectors were closed earlier this year (see story).

But XShares and FocusShares aren't the only ones to shutter ETFs in 2008. Claymore Securities decided to close 11 of its ETFs in January (see story.) And in May, Ameristock Corp. gave four bond ETFs the axe (see story).

With FocusShares throwing in the towel, a total of 41 ETFs will have closed this year through the Oct. 20 liquidation date set by the firm.

It's also noteworthy that Claymore's earlier decision marked the first ETF liquidations since 2006 when the SPDR O-Strip (OOO) was eliminated due to low assets.   

Many have been anticipating a new wave of closures this year after a wave of new ETFs launched in 2007.

In the case of FocusShares, it probably didn't help that two of its ETFs, the Homebuilders and Wal-Mart portfolios, launched with inopportune timing: Home builders are not building and consumers are not spending.

At a larger level, though, the real issue is the growing distance between ETF heavyweights, such as Barclays Global Investors and State Street Global Advisors, which together manage approximately $450 billion in assets, covering all the major sector and style asset classes, and on the other hand, firms that specialize in a theme, such as currency investing, or leverage and inverse funds, for which the manager finds a dedicated audience of advisors and investors.

According to the most recent NSX data, there are 24 ETF managers, and 10 of those have less than $100 million in assets; and nine of those 10 have less than $50 million in assets.

Clearly, the days of "throwing ETFs against the wall and seeing what sticks" are over. The seed capital players are no longer willing to place bets on just about anything, and with 813 funds—or 809 after the liquidation of the FocusShares foursome—niche ETF ideas will need to be much more closely scrutinized before heading to the product launchpad.