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The Journal of Index Investing

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Assessing the True Cost of Strategic-Beta ETFs

Ben Johnson, Hortense Bioy and Dimitar Boyadzhiev
The Journal of Beta Investment Strategies Summer 2016, 7 (1) 35-48; DOI: https://doi.org/10.3905/jii.2016.7.1.035
Ben Johnson
is a director of global ETF research at Morningstar in Chicago, IL.
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  • For correspondence: ben.johnson@morningstar.com
Hortense Bioy
is a director of passive fund research in Europe at Morningstar in London, U.K.
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  • For correspondence: hortense.bioy@morningstar.com
Dimitar Boyadzhiev
is a passive strategies research analyst at Morningstar in London, U.K.
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  • For correspondence: dimitar.boyadzhiev@morningstar.com
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Abstract

The report examines the differences in costs between strategic-beta (smart beta) exchange-traded funds (ETFs) and their more ordinary passive peers. Cost is an important consideration that isn’t always at the forefront of investors’ minds when selecting strategic-beta funds. The study assesses differences in fees, replication costs, and trading costs for a selection of European-domiciled, strategic-beta ETFs and market-cap-weighted ETFs linked to some of the most widely used broad equity benchmarks, including the S&P 500, MSCI World, and MSCI Emerging Markets indexes. The authors find a wide disparity in the fees charged by strategic-beta funds and that their total cost of ownership is, on average, significantly higher.

TOPICS: Exchange-traded funds and applications, performance measurement, developed

  • © 2016 Pageant Media Ltd
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The Journal of Index Investing: 7 (1)
The Journal of Beta Investment Strategies
Vol. 7, Issue 1
Summer 2016
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Assessing the True Cost of Strategic-Beta ETFs
Ben Johnson, Hortense Bioy, Dimitar Boyadzhiev
The Journal of Beta Investment Strategies May 2016, 7 (1) 35-48; DOI: 10.3905/jii.2016.7.1.035

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Assessing the True Cost of Strategic-Beta ETFs
Ben Johnson, Hortense Bioy, Dimitar Boyadzhiev
The Journal of Beta Investment Strategies May 2016, 7 (1) 35-48; DOI: 10.3905/jii.2016.7.1.035
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  • Article
    • Abstract
    • WHY STRATEGIC-BETA ETFS CHARGE HIGHER FEES
    • FEES ARE FALLING
    • INVESTORS NOT SO FOCUSED ON FEES
    • HIGHER REPLICATION COSTS
    • POTENTIALLY HIGHER TRADING COSTS
    • COMPARATIVE ANALYSIS OF TOTAL COST OF OWNERSHIP BY BENCHMARK CATEGORY
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