Grayscale Leadership and Those High GBTC Fees

Grayscale Leadership and Those High GBTC Fees

The flagship GBTC fund has suffered $17.6 billion in outflows, and Grayscale CEO Michael Sonnenshein departed the company this week.

Jeff_Benjamin
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Wealth Management Editor
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Reviewed by: etf.com Staff
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Edited by: James Rubin

Grayscale Investments this week announced the sudden departure of Chief Executive Officer Michael Sonnenshein, who will be replaced by Peter Mintzberg, the current global head of strategy for asset management at Goldman Sachs.

For anyone outside Grayscale’s executive boardroom or C-suite, it would be difficult to attribute the executive turnover to anything beyond the $17.6 billion that has flowed from the flagship Grayscale Bitcoin Trust ETF (GBTC) this year.

GBTC had about $26 billion in assets under management just before winning SEC approval to convert to a spot bitcoin fund on Jan. 10. It still has about $18 billion in AUM, which would be lower if not for bitcoin's massive price surge this year. The loss of assets has resulted largely from its 1.5% expense ratio, the highest among the 11 fledgling products and more than 12 times the expense ratio of the iShares Bitcoin Trust (IBIT)

Grayscale executives have certainly noticed the contrast between IBIT attracting more than $15.7 billion since Jan. 11—the most among spot bitcoin ETFs. IBIT reached the $10 billion mark faster than any ETF ever.

Maybe the bigger question is why investors are sticking with GBTC when the alternatives are a fraction of the price.

Grayscale Learns Fees Matter

Grayscale trimmed its expense ratio to 1.5% from 2% when it converted to a spot bitcoin fund earlier this year. But the higher fee was always based on business models practiced in places like Europe and Canada, not the United States, where a company like Vanguard was forcing fees lower across the board.

“They’re not really ETF natives and that’s why they got it so wrong,” said Bloomberg Intelligence Senior ETF Analyst Eric Balchunas.

“I think their misread was that 1.5% wouldn’t seem so high compared to the other spot bitcoin ETFs,” he added.

Balchunas said that at this point, Grayscale might be boxed in by a business model that has been designed around the higher fee model of its flagship product.

“They probably should have been lowering the expense ratio in increments, because if you just go to 20 basis points from here that will be really rough,” he said. “They’re not alone; this is the same dilemma that many active ETFs are facing right now.”

Jeff Benjamin is the wealth management editor at etf.com, responsible for coverage related to the financial planning industry. This includes writing, hosting podcasts, webinars, video interviews and presenting at in-person events.


Jeff is a veteran journalist with more than 30 years’ experience covering the financial markets. He has won more than two dozen national and regional awards for his reporting. He most recently worked as a senior columnist at InvestmentNews where he wrote about investment products and strategies, as well as the broader financial planning industry. Prior to that, Jeff worked as an analyst at Cerulli Associates where he researched and wrote reports on the alternative investments industry. Jeff also worked as a money management reporter at Dow Jones Newswires, where he covered the mutual fund industry.


Based in North Carolina, Jeff is a former Marine and has a bachelor’s degree in journalism from Central Michigan University.