Will Rhind. (Photographer: Michael Nagle/Bloomberg)

Fastest-Growing Gold ETF Using Fee War to Redefine the Industry

(Bloomberg) -- Will Rhind has seen the top of the gold market, and the bottom. Now, the leader of the fastest-growing bullion-backed ETF in the past year is redefining it by forcing down the fees paid by investors.

Fastest-Growing Gold ETF Using Fee War to Redefine the Industry

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.’’

Fastest-Growing Gold ETF Using Fee War to Redefine the Industry

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 fuiture 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."

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