Record global assets

News came this week that global ETFs have hit a record level of assets at USD12.71 trillion at the end of the first quarter of this year. One of the fastest growing segments of that growth has been active ETFs, discussed by Jason Xavier of Franklin Templeton in our latest Off the Record podcast, detailing how they work. Follow this link to listen to the podcast.

However, another story on our pages this week reveals the challenges small to mid-size active ETF issuers are facing in the US where the custodian platform, Fidelity Investments, has targeted nine such firms, and, according to The Financial Times has increased the fee for the Fidelity Investments platform in the US to USD100 per trade for investors to buy ETFs if the issuers have not agreed to make ‘support payments’. In terms of brokerage, Fidelity is reported by the Financial Times to be asking ETF sponsors to pay 15 per cent of total fund revenue.

Few would speak on the record on this very contentious subject although there has been a great deal of noises of fury with one issuer describing this as an ‘existential threat’ and another saying: "But the reality is the costs aren’t going to be borne by the issuer but by the end investor, which flies in the face of what the ETF wrapper has done over time," says one issuer.

For another view, hunt down Dave Nadig’s blog which manages to summarise the situation brilliantly, use a still from Casablanca, and conclude with this slightly cynical but sadly accurate statement: "Everyone will Roll Over and then Costs will Go up! Investors will pay! Yup. Sorry, but this is precisely what’s going to happen. Quietly, most other distribution avenues are already or will soon be taking their point of flesh, and yes, in the end, investors will pay. How could it be otherwise? We are, after all, the end-consumer!"

We have an In My Opinion from Calastone this week which also dealt with ETF fees, taking another direction, with David McGuinness, product director, writing that in the competitive world of ETFs, a prevailing trend of fee reduction has been seen as a strategic move by issuers to attract more investors.

"However, it is now becoming clear that the decision-making process for institutional investors extends far beyond just the headline fees, touching on deeper aspects of the ETF’s overall value and efficiency.

"Despite nearly 940 European ETFs slashing their fees over the last five years, new data from Morningstar reveals that only about 52 per cent of these funds saw an increase in net inflows," he says.

That other great ETF sector, Thematic ETFs, had their outing this week as well, with Fiona Nicolson’s interview with Themes ETFs, which opened its doors in December 2023, with an introductory suite of 11 ETFs – seven thematic and four fundamental versions. Another 20 products are currently waiting in the wings, which will boost the firm’s range to a total of more than 30.

Voting is now open in our ETF Express Canadian ETF Awards, please follow this link to place your votes.

Beverly Chandler, Managing Editor

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