A fee war has broken out among companies planning to launch the first U.S. exchange-traded funds (ETFs) holding Ether. This week, eight asset managers filed their final paperwork with the Securities and Exchange Commission (SEC), detailing the fees they plan to charge for their proposed spot Ether ETFs. This is one of the last steps before these ETFs start trading next Tuesday.
Fees and Waivers by Asset Managers
Here’s a breakdown of the fees that asset managers plan to charge for their spot Ether ETFs:
- BlackRock: Plans to charge 0.25%. After a partial fee waiver for the first year, the fund will charge 0.12% for its first $2.5 billion in assets.
- Fidelity Investments: Will charge a fee of 0.25% and waive the fee through the end of 2024.
- 21Shares: Plans to charge 0.21% and waive the fee for six months or the first $500 million in assets, whichever comes first.
- VanEck: Will charge 0.2% and waive the fee for the first year or until the fund reaches $1.5 billion in assets. If assets exceed $1.5 billion before the year is up, those over $1.5 billion will be charged 0.2%.
- Franklin Templeton: Will charge 0.19% and waive the fee for the first six months for the first $10 billion in assets.
- Invesco and Galaxy Digital Joint Venture: Their fund will charge 0.25%.
- Bitwise Asset Management: Will charge 0.2% and waive the fee on the first $500 million in assets for six months.
- Grayscale Investments: Will charge 2.5% for its Ethereum Trust and 0.25% for its Ethereum Mini Trust. The Mini Trust will have a fee waiver for the first year, charging 0.12% for its first $2 billion in assets.
Competitive Fees and Discounts
Most of the soon-to-be-listed Ether ETFs are offering temporary fee waivers or discounts to attract investors. According to filings with U.S. regulators, these promotions range from full fee waivers to discounts of about 50%, lasting from six months to a year. Some discounts expire once the ETFs manage a certain amount of assets under management (AUM).
Seven out of ten proposed spot Ether ETFs are offering fee cuts. The Grayscale Ethereum Trust (ETHE) and the Invesco Galaxy Ethereum ETF are not participating in the fee war. ProShares Ethereum ETF is behind in the registration process and is not expected to list next week.
SEC Filings and Listing Dates
Issuers filed the final round of amended S-1 registrations for nine proposed spot Ether ETFs on July 17. The SEC has reportedly indicated that July 23 will be the listing day for these funds. The latest filings detail the management fees for each fund.
Leading the Fee Race: Franklin Templeton
Franklin Templeton’s Franklin Ethereum ETF (EZET) is leading the fee race. Its management fees are fully waived for one year or until the fund reaches $10 billion in AUM. After this period, the baseline fee will be 0.19%, the lowest among the proposed ETFs.
Other spot Ether ETFs have fees ranging from 0.20% to 0.25%, with one exception. The Grayscale Ethereum Trust (ETHE), which has been trading under a different fund structure since 2017, will continue to charge its longstanding management fee of 2.5%.
Grayscale’s New Mini Trust
Grayscale is also launching a new fund, the Grayscale Ethereum Mini Trust, with a more competitive fee structure. For the first 12 months or until the fund’s AUM hits $2 billion, the Mini Trust’s fee will be reduced from 0.25% to 0.12%.
Industry Reactions
Grayscale faced criticism on July 17 for not lowering fees on its legacy fund, ETHE, which has nearly $10 billion in AUM. Some industry analysts also believe that the fees for the new Mini Trust are too high.
Bloomberg ETF Analyst Eric Balchunas commented that while the Mini Trust is cheaper, it may not be enough to attract significant organic investment, especially since BlackRock offers a similar fee.
Fee Waivers and Promotions
Most Ether ETFs are offering fee waivers and promotions to stay competitive. These waivers range from six months to a year and can significantly reduce the cost for investors. Here’s a closer look at some of these promotions:
- BlackRock: Offers a partial fee waiver for the first year, charging only 0.12% on its first $2.5 billion in assets.
- Fidelity Investments: Waives its 0.25% fee through the end of 2024.
- 21Shares: Waives its 0.21% fee for six months or the first $500 million in assets.
- VanEck: Waives its 0.2% fee for the first year or until the fund reaches $1.5 billion in assets.
- Franklin Templeton: Waives its 0.19% fee for the first six months on the first $10 billion in assets.
- Bitwise Asset Management: Waives its 0.2% fee on the first $500 million in assets for six months.
- Grayscale Investments: Waives the Mini Trust’s 0.25% fee for the first year, reducing it to 0.12% for the first $2 billion in assets.
Expected Impact of Fee Reductions
The fee reductions are expected to make these spot Ether ETFs more attractive to investors. Lower fees mean higher returns for investors, which can help attract more assets and boost the popularity of these funds.
The competition among asset managers is intense, with each trying to offer the most attractive fees and terms to capture a share of the market. This competition benefits investors, who can take advantage of lower costs and better terms.
Conclusion
As the first U.S. spot Ether ETFs prepare to launch, a fee war is heating up among asset managers. Companies like BlackRock, Fidelity Investments, 21Shares, VanEck, Franklin Templeton, Invesco, Galaxy Digital, Bitwise Asset Management, and Grayscale Investments are all vying for investors’ attention with competitive fee structures and promotional waivers.
The SEC’s approval of these ETFs and the competitive fees being offered are significant milestones in the development of the Ether ETF market. Investors will soon have more options for investing in Ether through ETFs, with the potential for lower costs and higher returns.
By staying informed about the fees and promotions offered by different asset managers, investors can make better decisions about which Ether ETFs to invest in. As the market evolves, it will be interesting to see how these fee wars impact the performance and popularity of these new investment products.
