The trend that’s been driving fees in the world of asset management relentlessly lower has finally reached its (il)logical conclusion. The Securities and Exchange Commission has just approved an exchange-traded fund with negative fees. It’s further evidence, if any were needed, that the rush to the cheap seats is unlikely to halt anytime soon — and that fund managers need to continue adjusting to their straitened circumstances.
Salt Financial will launch its Salt Low truBeta ETF by paying investors 50 cents for every $1,000 invested until the fund reaches $100 million — which the firm says is the minimum size to get listed on brokerage and advisory platforms — at which point the fee reverts to $2.90.
Of course it’s a bit of a gimmick designed to attract publicity, and the firm can still earn a crust by lending out the stocks it buys and charging the borrowers a fee.
But it does also highlight the winner-takes-all aspect of the ETF market, where the top three firms — BlackRock, Vanguard Group and State Street Corp. — control more than 80% of U.S. assets, according to figures compiled by Bloomberg Intelligence. Even in Europe, almost 65% of the market is in the hands of BlackRock, DWS Group and Societe Generale.
“David needed a slingshot to take down Goliath — we need a negative-fee model to force our way in,” Salt Financial president and co-founder Alfred Eskandar told the Financial Times. “New ETF issuers have two choices. They can do their best to survive for the six years it takes on average