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.
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Exponential ETFs will offer these fixed fee sub advisor services to select asset managers that align with the firm’s dedication to providing investors with low cost, innovative ETFs that fill an unsatisfied need within the market.
Bak said Exponential ETFs is committed to delivering innovative proprietary products for its clients and investors, adding they are also committed to paving a way for innovation throughout the ETF industry.
“Exponential Advisory Services is a step in that direction, and we are thrilled to see other ETF issuers benefitting from the infrastructure and team that we have built,” he said.
In addition to portfolio, trade and tax management, Exponential also offers a variety of capital market services such as portfolio compliance review, liquidity sourcing, real time monitoring, index construction, creation/redemption basket management and risk management.
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