Goldman Sachs made a big debut in the exchange-traded fund market with its recent introduction of smart beta portfolios. Goldman came in at such a low fee level that it put the existing fund managers on notice: Goldman was prepared to undercut the market to win in the intensely competitive ETF space.
Behind the scenes, though, there was some grumbling about the fee structure Goldman used to undercut the market. Goldman was offering annual fee waivers on its smart beta ETFs to bring down the cost to investors — fee waivers that would need to be renewed annually.
One ETF industry insider told me that at recent conferences, smart beta competitors could be heard whispering about this Goldman Sachs fee approach. But if the issue of fee waivers is worthy of whispers, there needs to be a lot more whispering in the ETF industry on a regular basis, and about a lot more ETF companies. There are 549 ETFs that offer a fee waiver that must be renewed annually, according to Morningstar data. That's a little more than one-quarter of the ETF industry.