Salt Financial Wins Approval For Negative Fee On Its Low Beta ETF

Salt Financial, the exchange traded funds issuer behind a pair of truBeta funds, said Monday the Securities and Exchange Commission approved the firm’s plan to offer investors a rebate on its Salt Low truBeta US Market Fund (CBOE: LSLT).

What Happened

LSLT debuted in March.

Prior to the ETF coming to market, New York-based Salt Financial revealed plans for a unique fee waiver plan for LSLT, which amounts to the firm refunding investors 50 cents for every $1,000 invested in the fund until LSLT reaches $100 million in assets under management. After that milestone is reached, LSLT will have an expense ratio of 0.29 percent per year, or $29 on a $10,000 investment.

“As part of the waiver and contribution arrangement, Salt Financial will waive its entire 0.29% fee and contribute an additional 0.05% from firm resources, netting to an effective 0.05% payment to the fund on the first $100 million in assets for the next 12 months,” said Salt in a statement.

Why It’s Important

While data indicate the ETF industry is growing, the industry is highly concentrated in the U.S. with just three issuers controlling over 80 percent of the assets. Disrupting advisors’ and investors’ to the “Big Three” of the ETF universe is a difficult task for upstart issuers, but competing on fees is a solid place to start.

Recently, zero-fee ETFs came to market, but Salt’s fee waiver plan for LSLT is even more unique and, potentially more disruptive, than zero-fee products.

“Salt is using this pricing incentive to help lower costs for investors as it seeks to grow asset levels to meet arbitrary thresholds for inclusion on brokerage and advisory platforms,” said the issuer. “The fee arrangement was previously announced as a part of a regulatory filing ahead of the fund’s launch in March which involved a 60-day review period.”

What’s Next

News of the approval of LSLT’s fee waiver plan could prove to be well-timed. With stocks falling on concerns the U.S. and China will not be able to reconcile trade differences, investors may be compelled to revisit low volatility strategies, such as LSLT. The fund’s holdings are domestic large- and mid-cap stocks with historical betas that compare favorably to that of the S&P 500.

LSLT has traded modestly higher since coming to market.

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