08.26.24

Next-Gen ETFs Buck Vanguard Effect With Fees Near Decade Highs

by: Emily Graffeo

Tapping into the hunger for complex strategies hinging on everything from stock options to crypto to stand out in the marketplace, this year’s new exchange-traded funds (ETFs) rank among the most expensive of the decade. The average fee of an ETF launched in 2024 is 61 basis points, one of the highest averages in data going back to 2010, according to a Bloomberg Intelligence analysis. Of the 383 ETFs launched so far in 2024, nearly two-thirds have a fee of 50 basis points or higher. The trend can be paradoxically traced back to the race toward lower fees happening among the highest ranks of the ETF league table. For years, the largest firms including Vanguard Group, BlackRock Inc. and State Street have slashed expense ratios on their passively-managed, core portfolio funds to entice new investors into the increasingly crowded field. In turn, investors have more budget, and likely more risk tolerance, to allocate a small slice of their portfolio to expensive, specialized funds. “Ironically, the more popular passive gets, the crazier and more expensive new products will become,” said Eric Balchunas, senior ETF analyst at Bloomberg Intelligence. “Because the rest of the portfolio is 10 basis points, people don’t really get that bothered about paying up for something that’s 1%.”

Read the full article on Bloomberg