Top Fee Generating, Wealth Creating and Destroying ETFs
Documenting the wealth destruction of thematic investing
October 2024. Reading Time: 10 Minutes. Author: Nicolas Rabener.
SUMMARY
- Market exposure ETFs generated the largest fees and shareholder wealth
- Thematic products destroyed most wealth
- Investors should consider asset-weighted returns when evaluating funds
INTRODUCTION
iShares` MSCI Emerging Markets ETF (EEM) is unusual as it provides almost identical returns to iShares’ Core MSCI Emerging Markets ETF (IEMG), but charges 0.70% per annum compared to a mere 0.09% for IEMG. EEM was launched in 2003 and BlackRock did not want to reduce its fees when cheaper products came to the market, so simply created another version of it at a lower price point.
Although IEMG manages close to $80 billion, EEM still has $17 billion in assets under management, which is odd. Given the high fees and the long fund life, EEM holds the title of the highest fee-generating ETF trading in the U.S. stock market.
SPDR`s S&P 500 ETF Trust (SPY) generated almost the same amount of fees for State Street, and ranks first for the ETF that generated the most dollar gains for its investors. Its counterpart is ARK`s Innovation ETF (ARKK), which destroyed close to $8 billion in shareholder wealth.
In this research article, we will review the top 25 ETFs that generated the most fees for asset managers, as well as the biggest gains and losses for the funds´ shareholders.
TOP 25: HIGHEST FEE GENERATING ETFS
We focus on all ETFs trading in the U.S. stock market and compute the total fees generated for the ETF issuers based on the historical assets under management and fees. All of the top 25 ETFs are passive products that provide access to markets like U.S. equities or high yield bonds. Most of these were launched in the early innings of the ETF industry when fees were higher. iShares dominates with 15 products, followed by SPDR with four and Vanguard with two products.
