While fees are a barrier to entry to hedge funds for many investors, the opposite is true of ETFs. The ETF industry average equal-weighted expense ratio is 0.6% and the asset-weighted expense ratio is 0.3%. Recent research by Morningstar shows ETFs and mutual funds in the lowest cost quintile are the fund industry’s most prolific asset gatherers. [Investors get a Good Deal With ETFs]
“According to our research the asset-weighted average annual cost for ETFs/ETPs is 31 basis points or less than one third of a percent, while fees charged by the majority of hedge funds are 2% of assets and 20% of profits,” adds ETFGI. “Accordingly, net inflows into ETFs/ETPs have been significantly higher than net inflows into hedge funds over the past few years. In the first quarter of 2015 net inflows into the 8,431 hedge funds globally were $18.2 billion, while net inflows into the 5,669 ETFs/ETPs were US$96.0 billion.”
Chart Courtesy ETFGI