Trillion-dollar asset managers are eagerly awaiting approval for their Bitcoin (BTC) ETF products, vying for market share as the opening bell approaches. While competition in various aspects is fierce, one significant battleground revolves around management fees—the annual costs imposed by funds to handle the BTC supporting their clients’ shares.
Unknown Fee Structures
Despite disclosing their planned fee structures in recent regulatory filings, the industry’s major players have mysteriously kept their rates undisclosed. Bloomberg ETF analyst Eric Balchunas highlights this as a significant question mark in the ongoing saga, explicitly mentioning BlackRock and Grayscale.
“One of the biggest unknowns left in this saga is what BlackRock’s fee will be on the bitcoin ETF,” said Balchunas.
Grayscale, a prominent player in the market, also did not mention a fee in its updated S-3 filing. Currently, its Grayscale Bitcoin Trust (GBTC) charges a 2.00% fee on client assets, which has drawn criticism from investors seeking BTC-linked alternatives.
“Grayscale CEO Michael Sonnhenshein has repeatedly promised to lower fees once conversion into an ETF is confirmed, but whether the fund can go lower than rivals remains a mystery,” the article notes.
Competitive Fee Offerings
The race to become the leading US fund for gaining spot Bitcoin exposure has seen several competitors reveal their fee structures.
- Ark Invest sets its management fee for its Bitcoin ETF at 0.8%, beating Grayscale and the ProShares Bitcoin Strategy ETF (BITO), which charges a 0.95% fee.
- In its Friday S-1 update, Valkyrie unveiled a matching 80 basis point fee.
- Fidelity disclosed an even lower 0.39% sponsor fee, currently the lowest in the ETF race.
- Galaxy and Invesco go further by offering zero fees for the first six months of activity and on the first $5 billion in assets. Although their standard sponsor fee is 0.59%, this enticing offer is expected to attract initial capital from investors.
With simultaneous approvals anticipated for this year’s Bitcoin ETFs, experts believe there will be increased competition compared to the first wave of Bitcoin futures ETFs in 2021.
BlackRock’s Strategy
BlackRock, the asset manager that initially sparked optimism among applicants, is closely watched for its fee structure. Balchunas predicts that BlackRock will target a 0.47% fee and could potentially undercut Fidelity if there is no competition from Vanguard.
“Undercutting Fidelity makes sense, could definitely happen, but they’ll also want to milk it because no Vanguard,” Balchunas added.
