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Famed analysts and investors have been putting their names on ETFs. Here's what it takes for a fund to succeed.
- ETF launches by popular market voices are surging, like Nouriel Roubini's Atlas America Fund, Dan Ives' Wedbush AI Revolution ETF, and Tom Lee's Granny Shots US Large Cap ETF.
- Starting an ETF is expensive, with significant costs like SEC filing fees, listing fees, and running expenses.
- Successful funds require strong performance and substantial assets under management to sustain themselves in a competitive market.
- Launching an ETF involves high initial costs, typically ranging from $50,000 to $500,000, including SEC filing fees and listing fees.
- Annual listing fees with exchanges like NYSE or Nasdaq add to the ongoing expenses of running a fund.
- Running a fund involves various costs such as staff salaries, compliance, marketing, and office rent, contributing to the overall operational expenses.
- ETF providers generate revenue mainly through annual fees charged to investors, necessitating a large asset under management to be financially viable.
- According to analyst Zachary Evans, it may cost around $200,000 a year to operate an ETF, with a break-even point typically requiring a $40 million asset under management.
- Some funds face pressure related to seed money, where initial investors committing capital for a specific period influence the fund's sustainability.
- Fund closures are becoming more common, with over 200 ETFs closing in 2023 and nearly 200 in 2024, often due to failure in performance or attracting sufficient assets.
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