ETF issuers are under immense fee pressure, and for independent issuers without the benefit of economies of scale at the large banks and mutual fund shops, the industry is developing barriers to entry that is slowing down innovation.
To help alleviate this problem, ETF issuer Exponential ETFs has announced the launch of its fixed fee sub advisory and capital markets service for select partnered asset managers.
Exponential ETFs CEO Phil Bak told ETF Trends its goal was to provide those same economies of scale and best practices for portfolio management to independent issuers, which will allow them to offer innovative strategies at competitive fees for their investors.
“Building out an experienced portfolio management team that utilizes the latest technology and best trading and risk management practices can be costly,” Bak told ETF Trends. “Firms that outsource this function have had to pay asset based fees, which adds to the cost of issuing their products.”
Further, when an independent issuer has success – against all odds – that asset based fee can become disproportional to the services being provided, Bak added.
“We are the first firm that will be combining two services – portfolio trading and capital markets – and offering it to our partners for a flat fee that provides cost certainty to issuers,” he said. “This solves a problem for ETF issuers, and it solves a problem for ETF investors.”
This first-of-its kind service provides select partners with combined portfolio management and capital markets solutions for a fixed fee as opposed to the traditional asset-based fee structure that results in higher costs for the fund manager as successful products attract assets.