Rhind, 39, joined the World Gold Council, the company behind SPDR Gold Shares, in 2007, just as exchange-traded funds were starting to gain investor attention. He watched assets hit an all-time high in 2012, followed by a shift in sentiment that sent the precious metal plunging to a bear market one year later.
In 2017, Rhind entered the market with his own shop, GraniteShares Gold Trust. Now he’s in the midst of a fee war with his former employer and other ETFs that’s helped boost his fund’s value to $458 million, from less than $12 million a year earlier. The price cuts are coming at a time when gold prices have jumped about 9.5 percent since August.
Once clients see the value of the product “then it doesn’t matter whether it’s provided by a big firm or a small firm,” Rhind said in a telephone interview. ”Big companies get used to doing things in a certain way. But I think in the next 10 years it’s going to be drastically different.”
Initially, GraniteShares carried a fee of $2 for every $1,000 invested, below the amount charged by iShares Gold Trust and about half that of SPDR Gold. Less than a year later, the World Gold Council and its distributor State Street Global came up with a cheaper alternative — SPDR Gold MiniShares, which trades under the ticker GLDM.
Rhind’s response was to go even lower, cutting his fee to $1.749.
”Evidence shows that lowering fees by as little as one basis point can be a difference of hundreds of millions of dollars in flows across the entire ETF industry, not just the gold space,” James Seyffart, an analyst at Bloomberg Intelligence, said in a phone interview. ”Cost is a big determinant in return over the long run.”
Even with a fee that’s less than half the median of rates charged by 25 U.S. non-leveraged precious metal-ETFs tracked by Bloomberg, GraniteShares, which trades under the ticker BAR, struggled to gain traction at the beginning. Its assets, which began at $2.6 million didn’t reach the $100 million mark until June of last year.
While that’s a drop in bucket, compared with SPDR Gold’s $35 billion in holdings at that time, Rhind’s strategy is less about how much others are losing and more on the future of his own company. His main goal: Having ”a product that can stand on its own two feet” in a crowded marketplace.
”We’ve just got to be as competitive as we can and continue to maintain our proposition of being the lowest-cost product in the market,” Rhind said “If we can continue to do that, we’ll continue to be competitive.”
The GraniteShares Gold Trust (BAR) was trading at $130.49 per share on Monday afternoon, down $0.58 (-0.44%). Year-to-date, BAR has gained 0.14%, versus a 1.83% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of Yahoo Finance.