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Photo: Towfiqu Photography/Getty Images

Investment firm Salt Financial plans to offer a fund that will temporarily pay investors to hold it, according to regulatory filings unearthed this week by Bloomberg, and analysts at Moody's Investor Service believe there's more of this to come.

Why it matters: While Stephen Tu, a Moody's vice president, wouldn't predict just how far the trend of negative-fee ETFs could go, he did say he thinks more asset managers will be offering to pay investors to hold their funds.

"It changes the psychology of the marketplace," Tu tells Axios.

Details: The negative-fee ETFs are the latest in the war by asset managers to attract money that is moving quickly out of active funds. In 2018, mutual funds saw the highest yearly outflows on record.

  • "The consumer trend toward passive investment products is akin to the adoption of an improved technology," Tu wrote in a recent Moody's white paper.

What's next? Moody's is anticipating so much more money will move into passive investing vehicles, in large part because of low fees, that by 2021 they expect passive funds to hold more assets than actively managed funds.

  • As of December 2017, researchers at the Fed found that passive funds accounted for 37% of combined U.S. mutual fund and ETF assets under management, up from 3% in 1995.
  • Investors are moving to passive strategies not just because they're cheap, but because management fees and commissions are a form of "leakage in earnings," Tu argues.

How a negative-fee ETF works: During the first year, ETF holders will earn 50 cents for every $1,000 invested in Salt's ETF, capped at $100 million, at which point it will be shared with all investors. A $2.90 management fee may be applied after April 2020.

Between the lines: Tu tells Axios that the fund's fee waiver of $34 on $10,000 of invested capital (offsetting $29 in fees to net $5 paid to the investor) likely can be offset by these companies through securities lending, i.e., loaning out stock to short sellers.

Go deeper: Invesco's chief executive says a third of the asset management industry could disappear over the next 5 years.

Go deeper

Kendall Baker, author of Sports
3 hours ago - Sports

European soccer is at war

Liverpool celebrating its 2019 Champions League victory. Photo: Nigel Roddis/Getty Images

Europe's biggest soccer clubs have established The Super League, a new midweek tournament that would compete with — and threaten the very existence of — the Champions League.

Why it matters: This new league, set to start in 2023, "would bring about the most significant restructuring of elite European soccer since the 1950s, and could herald the largest transfer of wealth to a small set of teams in modern sports history," writes NYT's Tariq Panja.

Dion Rabouin, author of Markets
3 hours ago - Economy & Business

2021's expected earnings blowout begins

JPMorgan CEO Jamie Dimon. Photo: Mark Kauzlarich/Bloomberg via Getty Images

First-quarter earnings so far have been very strong, outpacing even the rosy expectations from Wall Street and that's a trend that's expected to continue for all of 2021. S&P 500 companies are on pace for one of the best quarters of positive earnings surprises on record, according to FactSet.

Why it matters: The results show that not only has the earnings recession ended for U.S. companies, but firms are performing better than expected and the economy may be justifying all the hype.

3 hours ago - Science

NASA's Mars helicopter takes flight as first aircraft piloted on another planet

Ingenuity on the surface of Mars, filmed by NASA's Perseverance rover. Photo: NASA Jet Propulsion Laboratory

NASA successfully piloted the Ingenuity Mars helicopter for its first experimental flight on Monday, briefly hovering the aircraft as NASA's Perseverance rover collected data.

Why it matters: Ingenuity's short flight marks the first time a human-built aircraft has flown on a world other than Earth, opening the door to new means of exploring planets far from our own.