Reno Exchange-Traded Fund begins trading

Paul Hrabal has done three technology startups, and he figures startups are all about the same.

You need enough capital to survive a couple of years, you need the management expertise to run the business and you need the willingness to put in plenty of sweat equity.

When you're launching an Exchange-Traded Fund, Hrabal learned, you also need plenty of patience.

His Reno-based One Fund, the first ETF to be managed and operated entirely from Nevada, began trading on the New York Stock Exchange May 11.

Hrabal had waited 27 months for that first day of trading.

A one-time executive of Dell Computer, he sold his third startup a couple of years ago just as ETFs were beginning to gain traction among investors.

Hrabal had opened his first stock brokerage account with $3,000 of summertime earnings when he was 16. By the time he had completed a master's in business at the University of Chicago, he was a firm believer that markets are sufficiently efficient that investors are best served if they buy the market through ownership of low-cost index funds.

But as an ardent proponent of passive investing, he was frustrated that 80 percent of investor dollars flow into actively traded vehicles such as managed mutual funds.

ETFs, he figured, would prove to be an even better vehicle than indexed mutual funds for passive investors. They're more transparent buyers know an ETF's holdings day-by-day and can offer tax efficiencies and lower costs to investors.

"They're mutual funds 2.0," Hrabal says.

Putting that belief into action in a fund of ETFs, however, proved daunting. The mutual fund industry, Hrabal says, is the most regulated industry in America, and he spent the better part of two years shepherding paperwork through the Securities and Exchange Commission.

Even more challenging: Until regulators declared One Fund's registration effective, Hrabal couldn't do any marketing, even informally. Uncertain when the SEC would act (an event that occurred six months later than Hrabal had predicted), he didn't want to hire staff.

That meant, in turn, that Hrabal hit the ground running hard as soon as the registration was effective. He was on the phone at 5 a.m. with representatives of major brokerage houses in New York City, telling them the story of One Fund.

The fund plans to pool investors' dollars to purchase ETFs in small, medium and large companies, both in the U.S. and international markets.

Hrabal says One Fund is targeted toward investors aged 30 to 50 they're likely to be most interested in the fund's long-term growth strategy who are college-educated and have household incomes of $60,000 or more.

Most critically, however, the fund targets buyers who have less than $100,000 in investment assets. Hrabal says his goal is to provide those smaller investors with service that they no longer can receive a most brokerage firms.

"I want to make it simple so that people aren't intimidated," he says.

The fund's annual management fee is 0.51 percent of its average daily net assets.

At the same time that he was explaining the new fund to brokerage firms, Hrabal also preparing to double the size of the staff of its advisory firm, U.S. One. The staff is expected to total about 12, and Hrabal is looking to muscle up its sales and marketing arm.

That's important because the fund reaches break even once assets total $75 million to $100 million.

The break-even line is easier to reach in Nevada, says Hrabal, who moved to the Silver State from California specifically to take advantage of its tax climate and its quality of life.