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Wednesday, March 06, 2019|
A Different Kind of Free?
Never mind free lunches: what about free funds?
SoFi will be the ETFs' sponsor, while New York City-based Toroso Investments is the investment advisor and Ann Arbor, Michigan-based CSat Investment Advisory (dba Exponential ETFs) is the subadvisor. No accounting firm is yet listed, but other vendors will include: U.S. Bank (custodian, sub-administrator, fund accountant, and transfer agent); Godfrey & Kahn (legal counsel); Solactive (index provider); Tidal (administrator); and Foreside (distributor). Three of the ETFs will list on NYSE Arca, while the fourth will list on the Nasdaq.
SoFi's move hearkens back to the launch last summer of Fidelity's first zero-fee, traditional, open-end mutual funds, which brought in nearly $1 billion in month one. Yet it's crucial to note some differences. First, since ETFs trade like stocks, they normally require payment of ticket charges to buy and sell; buying and selling traditional no-load mutual funds requires no such charge. Second, thanks to bid-ask spreads in ETF trading, there can be an effective cost to buying and selling them; mutual funds avoid this, too, by being bought and sold at NAV, with no premium or discount. Third, as noted by ETF.com, in this case the two proposed free SoFi ETFs do include expense ratios 19 bps and are only free thanks to a fee waiver that, in theory, could be changed or removed (SoFi has agreed to pay the ETFs' expenses and provide marketing support); the free Fidelity funds simply have expense ratios of zero bps.
On the flip side, distribution of Fidelity's free funds is limited to Fidelity's own direct retail platform, as the funds are a way to bring in and keep in investors that can then turn to Fidelity for other services. Yet the SoFi ETFs, thanks to trading like stocks, could be more broadly accessible.
Printed from: MFWire.com/story.asp?s=59409
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