The headline charge on a new US equity ETF in London is 0.00%. A few lines further down the same page sit a swap fee of 0.145% and a payment of 0.08% a year from the bank that provides the swap.
Zero is a number that marketing departments love and fund accountants treat with suspicion. Janus Henderson’s fund page shows a total expense ratio of 0.00%, an initial charge of 0.00% and an annual charge of 0.00%. The ongoing charge is shown as a dash.
The fund is synthetic. It holds a basket of developed market equities and swaps their return with Citi for the return of the Solactive GBS United States 500 Index. That is not the S&P 500, but it is 500 of the largest US companies, which is most of the same idea.
The page then lists a swap fee of 0.145%. Beneath it sits a “swap provider contribution” of 0.08% of net assets a year, paid to the fund and described as not a cost to investors. So the investor pays nothing to Janus Henderson, something to Citi, and Citi hands some of it back. If the two simply offset, the net figure is about 0.065%. That is very cheap. It is not zero.
In fairness, every synthetic ETF has a swap cost. It normally lives inside the tracking difference, where nobody goes looking for it. Janus Henderson has at least printed it on the fact page, right next to the zero, which is more than most rivals do.
Most AI-powered funds keep a human in the room to overrule the machine. This one has written the human out of the prospectus. The model, it says, “operates fully autonomously, without human intervention or interference”, and the sub-adviser will not override its selections “other than to ensure” regulatory compliance.
The mechanics are simple. Every trading day, at about 11 a.m. Eastern, the model ranks all 500 members of the S&P 500 from most to least attractive. The fund holds the top 25 to 35, roughly equally weighted, and the rankings are not updated during the day. The unitary fee is 0.53%.
The prospectus also insists that “The Model does not predict future performance.” It merely decides each morning which 30 or so of America’s largest companies to own and which 470 to ignore. Most people would call that a prediction, but the lawyers have been very clear. Its dollar-neutral sibling, AINT, uses the same daily ranking to go long the top 10 to 14 stocks and short the bottom 10 to 14, and charges 1.25%. Owning the model’s favourites costs less than half as much as also betting against its least favourites.
Memory chips used to be a component. They are now a theme. Defiance’s memory fund is a UCITS product built on HANetf’s platform for 0.69%, and its launch release called it “Europe’s first memory UCITS ETF”. In the US, Roundhill already runs an actively managed memory fund for 0.65%, holding companies that earn at least half their revenue or profits from memory, which means Micron, Samsung, SK Hynix and friends.
I recently wrote about an emerging markets AI fund that was, two thirds of the way through, a bet on the memory cycle. The memory cycle now has dedicated funds on both sides of the Atlantic. Cycles rarely notice.
Its sibling AIPO is the UCITS copy of Defiance’s US AI and power fund, and its weights are worth dividing out. Power generation and grid equipment take 50%, data centres and AI hardware 20%, construction and engineering 15% and utilities 15%. Four fifths of this AI fund sits in the things that AI plugs into.
Most of this fund’s equity exposure comes from shares it has promised to buy, rather than shares it owns. Dynamic’s own fund page shows the portfolio dominated by written puts, with a minority in long equities, measured against a benchmark split evenly between the Cboe S&P 500 PutWrite and BuyWrite indices.
It is not new. The alternative mutual fund has been running for years, holds more than C$13 billion and uses “moderate leverage to potentially enhance total returns”. The monthly distribution is described, with commendable precision, as “fixed but not guaranteed”. Its top holdings include Cameco, Vertiv, GE Vernova and Quanta Services, a list that would sit comfortably inside the power pillar of the Defiance fund above.
What is new is the ETF series, and on that Dynamic has so far said nothing. The fund page shows no ETF series, and it was not among the 18 funds in Dynamic’s latest ETF distribution announcement. Our listing data shows three series, one in Canadian dollars and two in US dollars, one hedged and one not. I recently wrote about Dynamic’s new systematic equity ETFs. This one arrived more quietly, which for a C$13 billion fund is quite an achievement.
The second zero-fee fund in this batch needs no footnotes. It is a new distributing share class of Scalable Capital’s world fund, built with DWS, paying out quarterly and holding more than 2,400 stocks across 47 developed and emerging markets.
It uses swaps too, but for a sensible reason: they let the fund collect US dividends without losing a slice to withholding tax. The accumulating class charges 0.15%. This one has its fee waived to zero for an introductory period.
Both zero-fee funds in this piece use swaps. One needs three lines on its fact page to explain what zero means. This one owns the world, sends the dividends home every quarter and asks for nothing else, which is about as much as anyone should want from a fund.