As I’ve noted in recent posts, ETFs’ popularity can jeopardize their integrity. Marketers with a pre-meltdown mentality have raised fees and added money managers — who try to select securites and time the market — in an effort to leverage the brand to gather assets from uninformed investors.
PowerShares stays serious by lowering the expense ratios on its ETFs to attract smart investors. They just slashed the expense ratio on a bunch of ETFs from .60% to .39%.
Fee Cuts Show Investors Are Paying Attention
In case you missed it, PowerShares cut fees on 11 “fundamentally weighted ETFs,” and cut them in a major way:from 0.60% to 0.39%. That makes these funds more competitive with mainline index funds and ETFs, and is good news for investors for a number of reasons.
Most importantly, it means that investors are demanding lower fees. Investors in the past have seemed slightly fee-insensitive in the ETF space, and ETF providers have taken advantage of this by slowly inflating the average fee charged for new ETFs. In the past, almost all ETFs charged less than 0.50%. Now, we don’t blink an eye when a new fund launches with a 0.75% or 0.85% expense ratio. Part of that is explained by the move into more niche areas of the market, but part is caused by the fact that investors were willing to pay these fees in a bull market.
Not anymore:I’m guessing that a lot of investors expressed interest in these new funds, but told PowerShares that the expense ratio was too high.
Filed under: ETF News | Tagged: epense ratio, ETF, fees, PowerShares
