Several new exchange traded funds (ETFs) are going to include a 12b-1 fee as part of their operating expenses. Both PowerShares and Claymore will begin using these fees, but are not currently doing so. Both firms will likely try to "build a low cost structure", and as Herb Morgan submits in Seeking Alpha that "…both companies will quietly and without fanfare begin charging those pesky 12b-1 fees as soon as the assets in the funds grow to a level of irresistible temptation."
Even ETFs with 12b-1 fees have lower expense ratios than conventional mutual funds. And since most managed funds have had trouble beating their benchmarks over the years, these more expensive ETFs should not have trouble attracting assets. American funds tend to be more expensive and are mostly sold through the broker/dealer channels, but ultimately they have proved to have staying power because of their consistent performance.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.