Monday, February 5, 2018

Zero-Fee ETFs?

The management fees on most mutual funds and ETFs have fallen significantly due to competition in the space. With some as low as .03%, can it go any lower? The answer is yes, as some are predicting a fee of 0% (or even a negative fee, with investors being paid to use certain products). How is this possible? With more assets, economies of scale allow for a lower fee. Further, asset managers can generate revenue on the underlying securities, primarily through lending to short sellers. So, who will win the "race to zero?" See article here, WSJ.

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