The wave of cost-cutting that has been sweeping the more than $6 trillion global market for exchange-traded funds for the past two years may finally have reached its limit.

In the space of a few weeks, the first and only fund that paid people to invest has switched to a new owner and started to charge, while one of the few “zero-fee” ETFs has been shut down completely.

The two products were unrelated, but the twin events look like confirmation of what many in the industry have long believed: The fee war could only go so far. Now they’re preparing for what they hope will be a new era that places more value on strategy and returns than on price point.

“ETFs have come to a new stage of development where the fee war is only part of the story,” said Linda Zhang, chief executive officer of Purview Investments in New York. “The next phase of the story is who is able to provide better performing products, net of fee.”

If that happens it’ll be a sea change for the passive industry.

Faced with an increasingly competitive landscape -- at last count there were roughly 2,200 ETFs in the U.S. alone -- issuers have been slashing expense ratios amid the desperate fight to lure assets.

While it left plenty of experts wondering how they were making money and fretting potential hidden costs, for investors it should have been a dream come true.

Alongside cuts to trading commissions it meant even the smallest among them could buy an ETF through their favorite broker for peanuts then pay nothing for its annual management fee. Yet it seems not many took advantage.

Salt Financial made headlines last year by releasing the Salt Low TruBeta U.S. Market ETF (LSLT) which would temporarily pay investors, with holders receiving 50 cents for every $1,000 -- until it grew to $100 million or April 2020 when a $2.90 management fee could kick in.

The ETF never managed to raise more than about $12 million, and the issuer announced last month that the fund—along with another Salt product, the Salt High TruBeta U.S. Market ETF (SLT)—would be acquired by Pacer Advisors. It started charging a fee of 0.29% in May.

“Even though it worked in the sense that it raised assets, it didn’t raise them enough for us to feel that being in the retail business made sense,” said Alfred Eskandar, co-founder and president of Salt Financial, which still supplies the indexes for LSLT and SLT. “People are starting to see through that, they’re realizing it’s about quality, it’s about the uniqueness of the strategy, it’s about performance.”

The market turmoil caused by the coronavirus may have accelerated that trend, as traders navigate the extreme volatility and seek out investments that can thrive in what could be a new economic era.

Michael Venuto, chief investment officer of Toroso Investments, points to the outperformance of some thematic funds and actively managed offerings like the Ark Innovation ETF (ARKK) as the latest craze occupying investor attention.

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