Kelly ETFs has moved to make its Kelly Residential & Apartment Real Estate ETF (RESI) free to own for the next 12 months, just 4 1/2 months after it debuted.
The fee waiver, which went into effect Monday morning, eliminates the 68 basis points in fees for the $1.4 million fund through the end of April 2023. The firm is headed by Kevin Kelly, the indexer behind the Pacer Benchmark Industrial Real Estate SCTR ETF (INDS) and the Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (SRVR).
RESI and its two sister funds debuted in mid-January without much investor attention, attracting less than $4 million in assets since.
Zero-fee ETFs are nothing new, with firms like Goldman Sachs charging no fees upon launch for an emerging market debt fund, and BNY Mellon and SoFi charging nothing from investors for access to their large cap equity ETFs.
However, implementing a fee waiver months after a launch is unusual, particularly for a new issuer with a minimal asset base.
Kevin Kelly declined to comment about the specifics of financing a year of no fees in an interview Monday morning.
He said residential real estate is primed to produce returns in the current inflationary environment as millennials struggle to afford buying a home and remain in a rental market with growing prices, giving residentials a chance to outperform the rest of the real estate sector in a rising-rates environment.
Such is Kelly’s conviction that he is willing to undercut low-fee giants with billion-dollar ETFs that have broad real estate exposure, such as the 7 basis point Schwab U.S. REIT ETF (SCHH), the 10 basis point Real Estate Select Sector SPDR Fund (XLRE) and the 12 basis point Vanguard Real Estate ETF (VNQ).
“We think the value proposition of investing in residential real estate right now is so compelling that we are willing to forgo fees and not make any money on it so people can have access to it,” he said. “... We wanted to compel investors to give it a really serious look to put in their portfolios.”