Forget Failure of Negative-Fee ETF LSLT, Fee War is On
Zacks Investment Research | Jul 17, 2020 02:30AM ET
The battle for low-cost ETFs intensified globally in the past few years. The race to launch the cheapest exchange-traded fund in a specific segment had reached such a level that Social Finance Inc., an online lender also known as SoFi, made headlines in early 2019 by proposing two ETFs that waived off managed fees for at least the first year of operation (read: SLT .
Both funds failed to gather sizable assets and the issuer announced last month that the fund LSLT -- along with the other product SLT -- would be acquired by Pacer Advisors. It started charging $2.90 fee in May . At the current level, LSLT has an asset base of $8.5 million while SLT has about $8.2 million in assets.
“Even though it worked in the sense that it raised assets, it didn’t raise them enough for us to feel that being in the retail business made sense,” said Alfred Eskandar, co-founder and president of Salt Financial, as noted by Bloomberg and quoted on Yahoo Finance .
Does This Mean End of Low-Fee Era?
Not really. Investors should note that Salt Financials’ ETF tracked an index of its own, and since “self-indexing can save fund issuers money,” the company can go for a negative fee fund. However, for all other issuers, launching a negative-fee ETF may not be possible, but cutting fees to the lower levels is possible to make one’s products competitive.
Notably, BlackRock Inc (NYSE:BLK). VOO .
Apart from this, in late June, BlackRock slashed expense ratios for iShares Core S&P Mid-Cap ETF to 0.06% from 0.07% . Industry competition remains fierce, especially between BlackRock and Vanguard, the two largest players.
Moreover, BNY Mellon (NYSE:BK) recently launched the first zero-fee bond fund, BNY Mellon Core Bond ETF BKLC , noted by Bloomberg, quoted on Yahoo Finance. The funds entered the market in April. As of Jul 15, 2020, BKAG has an asset base of $27.9 million while BKLC has amassed about $36.78 million. These two products’ success will tell how investors are taking the concept of zero-fee products.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.