IJR expense information is for 1 year ending 3/31/2018. SLY information is for 1 year ending 06/30/2017. SCHA expense information is for 1 year ending 8/31/2017. VB expense information is for 1 year ending 12/31/2017.
What this data shows is that for each of the funds, with the exclusion of SLY, the fund company can completely cover their fund expense through securities lending revenue.
Summary
In summary, there are a lot of operational activities of fund management which can impact the expense ratio more than just the stated number in the prospectus. Depending upon the asset class, many funds can cover the entirety of their expenses just through securities lending. Some could even call that “free.”
The truest test of overall efficiency, however, can be measured by tracking error. All the income and expenses a fund generates will be netted and impact the overall efficiency of a fund tracking an index. The closer a fund tracks it’s benchmark, the better it is for the end investor.
This article was written by Tyler Denholm, CFA, who is Vice President – Investment & Research at TOPS ETF Portfolios, a participant in the ETF Strategist Channel.
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Source: Bloomberg for historic price and return references, as well as charts.
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