Online lender Social Finance (SoFi) is launching two free exchange-traded funds (ETFs). Citing regulatory filings, Bloomberg reported that the funds — set to waive management charges for at least the first year — will focus on U.S. stocks.
The funds are free until at least March 27, 2020, with the waived fee being listed in the filing as 0.19 percent. While the funds are branded by SoFi, they are actually being issued through a trust, with Toroso Investments serving as the investment advisor, Exponential ETFs running the funds on a daily basis and Solactive creating the benchmarks.
Fidelity Investments was the first to offer free mutual funds last year, with those assets reaching $1 billion. Right now, the cheapest ETFs charge $.30 for every $1,000 invested. Together, three issuers — BlackRock, State Street and Charles Schwab — comprise 60 percent of the $3.7 trillion market in U.S. ETFs, while The Vanguard Group, which charges $.40, makes up another 26 percent.
SoFi has found a way to make its ETFs stand out from the pack. While cheaper funds offered by competitors are weighted by market capitalization, SoFi's will use a proprietary mix of market cap and fundamental factors. The filing revealed that the company has given “support in developing the methodology used by the index to determine the securities included.”
The news comes after the Federal Trade Commission (FTC) announced that it has resolved its investigation into SoFi. The FTC approved a final consent order, resolving the company of allegations that it misrepresented how much student loan borrowers saved by refinancing with the online lender, or how much they could save working with the company.
Under the consent order, SoFi is prohibited from misrepresenting to consumers how much they can, or have, saved using SoFi products. In addition, the company cannot making claims about savings unless it has the evidence to back it up.