Thanks, MangoMan!MangoMan wrote: If you go to Mebane Faber's website and do a search, he goes into some of the hassle and expense involved from first-hand experience. http://mebfaber.com/
Here's what I found:
-- http://mebfaber.com/2014/04/17/how-to-start-an-etf/Sub Advisor
Subavisory is usually when a RIA that does not have, or want the SEC exemption to launch ETFs, partners with a company that does. The model is very similar to the publishing industry where a content provider parters with a firm to provide infrastructure support. There are a number of players here including AdvisorShares, Exchange Traded Concepts, Alps, ETF Issuer Solutions, and Canvas. If you are a manager looking to partner with one of these firms, they will send you a basic proforma that will ballpark most of the costs and profits as you raise (or don’t) assets.
The economics are more favorable than index licensing (generally), but may also involve upfront fees ($0-100k) or exposure to monetary risk if the ETF does not raise assets. Typically the subadvisor receives somewhere in the ballpark of 50-90% of the profits from the ETF, depending on other costs and risks taken.
Other pros of subadvisory is not having to build the infrastructure that goes along with launching an ETF and the subsequent costs like board meetings, hiring a CCO, and other duties.
Cons of subavsiory include loss of control over the product, revenue sharing, branding confusion, etc.
This option is usually a great choice for those who are looking to only launch one or two ETFs, and not have to deal with pursuing their own exemption.