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Rating:Not Every ETF is Super Cheap Not Rated 0.0 Email Routing List Email & Route  Print Print
Tuesday, March 18, 2014

Not Every ETF is Super Cheap

News summary by MFWire's editors

I wonder if the same sort of debate took place when discount carrier JetBlue started to offer its premium service, Mint.

Like some formerly bargain air carriers, some ETF sponsors are starting to offer products that are decidedly upscale compared to their discount brethren, and the industry is trying to decide what to make of it.

Case in point: the First Trust Value Line Dividend Index Fund (FVD), which at 70 bps is the deemed the priciest ETF by Morningstar. According to analyst Abby Woodham the ETF "has a compelling strategy, but its expense ratio induces sticker shock." She thinks the fund's most "attractive qualities are relative stability, emphasis on quality stocks, and significant value tilt."

Indeed, Barron's Brendan Conway agrees that the pricey ETF isn't worth the dough.

To be sure, 70 bps is still peanuts compared to many active managers, but compared to some ETFs that cost as little as 10 bps, the heavy price tag does raise some interesting questions.

Such as, are ETF sponsors breaking ranks on the long-going pricing war with active products? Will actively managed ETFs complicate the debate on the product's perceived benefits? What affect will this have on investor demand?

And most importantly, will this provide any openings for active fundsters to attack ETFs on the marketing battlefield?  

Edited by: Amy Xie


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