ETF gurus - fee mechanics
Discussion
I’ve hit one of those complete mental blocks where I know there is an answer but I can’t for the life of me work it out. That sort of missing final bit of a jigsaw that’s right in front of you etc. I’m almost thinking that just writing this post may clear the fog.
The cost of running an ETF is extracted from the fund on a daily basis. Let’s say this is 0.2% per annum so if you buy £100k of an ETF you have the market spread to pay which looks to be as much as 40 bips round trip but also 0.05 bips per day is taken as fund fees, amounting to 0.2% per annum.
Discounts and premiums to NAVs are arbed out via the Authorised Provider who will facilitate the creation of removal of ETF units and the corresponding action in the underlying to make profit.
Going back to the annual management fee of the ETF, if it were to stand alone then over time the value of the ETF would deviate from the physical basket at the AP so is it is simple as this fee element just getting arbed out in the normal course of action?
The cost of running an ETF is extracted from the fund on a daily basis. Let’s say this is 0.2% per annum so if you buy £100k of an ETF you have the market spread to pay which looks to be as much as 40 bips round trip but also 0.05 bips per day is taken as fund fees, amounting to 0.2% per annum.
Discounts and premiums to NAVs are arbed out via the Authorised Provider who will facilitate the creation of removal of ETF units and the corresponding action in the underlying to make profit.
Going back to the annual management fee of the ETF, if it were to stand alone then over time the value of the ETF would deviate from the physical basket at the AP so is it is simple as this fee element just getting arbed out in the normal course of action?
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