For instance: If I bought a 100 shares of iShares Dow Jones US Real Estate (IYR) at $ 70.00 and sold at $75.00, how does iShares make money?
I am paying the commision to my broker not iShares.
EFT’s just like regular “Open End” mutual funds have internal operating expenses. They take a few pennies out of the ETF each day. This effectively reduces the published Net Asset Value (NAV), the value of the assets held by the ETF.
ETFs do not make money on transactions. That is no different than any other stock. They get a management fee that they take out of the income they receive from the underlying securities.
There is a fee built into the price. From a UK point of view and using Barclays iShares as an example, they are swapping the underling for the ETF with Barclays. I think it is known as a two-way variable transaction cost of cash purchase (creation) and redemption of the iShares as a percentageof the net asset value. It can get quite complicated due to different time zones in international shares, and I beleive asset values are calculated in real time. The MMs who create ETFs can also make money by buying the underlying constituent/s a t opportune times and prices and swap those for ETFs at, hopefully a better price, or at least sell the ETF at a better price.I.e. They would buy shares that make up the particular index, for example while the market is dipping and when the market rises exchange the shares for ETFs and sell the ETFs to the brokers. The cost to the retail client is called Total Expense Ratio (which can be as low as 0.2%) and this is included in the share price. So, everybody wins! See article
First of all most of the managers receive a salary and are very well paid.
The company that issues the ETFs receive management fees which are charged against the entity prior to any distributions.
ETFs, like regular stock, the issuers do not make any money when people invest in them or when shares are sold.
Once the underwriting is complete, trading monies do not pass back to the issuer
August 28th, 2009 at 3:27 pm
EFT’s just like regular “Open End” mutual funds have internal operating expenses. They take a few pennies out of the ETF each day. This effectively reduces the published Net Asset Value (NAV), the value of the assets held by the ETF.
August 30th, 2009 at 11:33 pm
ETFs do not make money on transactions. That is no different than any other stock. They get a management fee that they take out of the income they receive from the underlying securities.
August 31st, 2009 at 8:49 am
Just like a regular mutual fund, the fund management takes a “cut.” Check the Expense Ratio.
September 1st, 2009 at 2:21 am
There is a fee built into the price. From a UK point of view and using Barclays iShares as an example, they are swapping the underling for the ETF with Barclays. I think it is known as a two-way variable transaction cost of cash purchase (creation) and redemption of the iShares as a percentageof the net asset value. It can get quite complicated due to different time zones in international shares, and I beleive asset values are calculated in real time. The MMs who create ETFs can also make money by buying the underlying constituent/s a t opportune times and prices and swap those for ETFs at, hopefully a better price, or at least sell the ETF at a better price.I.e. They would buy shares that make up the particular index, for example while the market is dipping and when the market rises exchange the shares for ETFs and sell the ETFs to the brokers. The cost to the retail client is called Total Expense Ratio (which can be as low as 0.2%) and this is included in the share price. So, everybody wins! See article
September 4th, 2009 at 12:24 am
First of all most of the managers receive a salary and are very well paid.
The company that issues the ETFs receive management fees which are charged against the entity prior to any distributions.
ETFs, like regular stock, the issuers do not make any money when people invest in them or when shares are sold.
Once the underwriting is complete, trading monies do not pass back to the issuer