The cost of holding ETFs has fallen for years amid an intense fee war among issuers. Single-digit expense ratios are commonplace now, and in some cases even those look expensive, like the 0.09% charged by the SPDR S&P 500 ETF Trust (SPY), triple what some competitors charge for the same exposure.
All this is unequivocally great news for investors, but for ETF issuers, not so much. As expense ratios drop, so do the revenues those funds generate, and in most cases, there is little issuers can do about it. Failing to lower fees can lead to hefty outflows, as cost-conscious investors and fiduciary-bound advisors gravitate to cheaper funds.
Case in point: SPY has lost a lot of ****** ets over the years to the Vanguard S&P 500 ETF (VOO) and the iShares Core S&P 500 ETF (IVV), two cheaper funds tracking the same index. VOO has since grown into the largest ETF in the world, at more than $1 trillion in AUM.
Even in a price war, the victors take hits. The cheapest ETFs may gather the most ****** ets, but that is often more than offset by the decline in fees. On the list of the biggest ETF cash cows, only a handful of funds are ultra-cheap. Many more are expensive by ETF standards.
The table below lists the 20 ETFs with the highest implied revenue, an approximation of how much money a fund generates for its issuer, derived by multiplying ****** ets under management by the expense ratio.
#funds
All this is unequivocally great news for investors, but for ETF issuers, not so much. As expense ratios drop, so do the revenues those funds generate, and in most cases, there is little issuers can do about it. Failing to lower fees can lead to hefty outflows, as cost-conscious investors and fiduciary-bound advisors gravitate to cheaper funds.
Case in point: SPY has lost a lot of ****** ets over the years to the Vanguard S&P 500 ETF (VOO) and the iShares Core S&P 500 ETF (IVV), two cheaper funds tracking the same index. VOO has since grown into the largest ETF in the world, at more than $1 trillion in AUM.
Even in a price war, the victors take hits. The cheapest ETFs may gather the most ****** ets, but that is often more than offset by the decline in fees. On the list of the biggest ETF cash cows, only a handful of funds are ultra-cheap. Many more are expensive by ETF standards.
The table below lists the 20 ETFs with the highest implied revenue, an approximation of how much money a fund generates for its issuer, derived by multiplying ****** ets under management by the expense ratio.
#funds
2 days ago
