The Securities and Exchange Commission’s approval of the first negative fee ETF earlier this month may be good news for investors but not for asset managers.
Analysts at Moody’s Investors Service say the approval of Salt Financial’s Low truBeta U.S. Market ETF (LSLT), which rebates investors 5 basis points for quite some time, is a “credit negative for asset managers because it furthers the relentless march towards fee compression in the fund industry.”
LSLT will essentially pay investors 5 basis points until May 2020 or until the fund reaches $100 in assets, whichever comes first, as a result of the SEC decision. It had been charging 29 basis points beforehand since its debut in March.
(Related: First Negative-Fee ETF Approved by SEC)
The first negative-fee ETF on the market follows the introduction of several no-fee funds — two no-fee ETFs from SoFi that started trading in April, and four zero-fee mutual funds, two each introduced last August and September.
(Related: Fidelity Unleashes No-Fee Index Funds)