Do ETF Fees Drive Flows? – 2020

Following up on an astute question from a loyal reader of my recent article on ETF & Mutual Fund flows (Link), I compiled details on the largest ETFs in each equity and bond category, comparing their 12-month flows with management expenses.

Equity ETFs: The race to rock-bottom fees has more or less been reached in the large-capequity space, though it appears that investors still fled 9bps SPY for lower-priced VOO and to a lesser extent IVV. In the broad market category, VTI has been a runaway leader, I assume based on its far-leading size & trading volume, through all funds are priced at 3bps. While the largest international stock funds are much smaller both in terms of AUM and trading activity, even here we see the pattern of outflows from the 32bps outlier (EFA) into its lower-priced peers and sister fund. An interesting pattern in small-cap stocks, where even with significantly larger liquidity, IWM has lost assets while others have gained.

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Bond & Gold ETFs: In the broad bond category, AGG & BND have been going head to head for years, with similar fee structures and strong flows for both. In high yield, it appears that size and volume matters, and even with a slightly higher fee, HYG has gained over JNK. And finally, in the gold space, both funds have grown quickly this year, with GLD retaining its market lead despite a higher fee.

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Methodology note: I have attempted to include only like-for-like ETFs in each group, including only funds with identical (or nearly identical) benchmarks. To confirm this, I display the 12-month performance. Additionally, since there are many factors that influence fund flows aside from fees, such as inclusion in ETF models, branding, distribution strategy, size, liquidity, age, and others – I show just the most visible of these – Average Daily volume (in $ millions). This report does not attempt to analyze all the other factors that may influence fund performance. I tried to keep the groups to just two or three funds, including a fourth ETF only when the same issuer dominates a category.

“Let’s be careful out there” – Sgt. Esterhaus, Hill Street Blues, 1981.



Data Sources:,, issuer websites.

Elya Schwartzman is the founder and president of ESIC LLC, an independent advisory firm specializing in ETFs, indexing, fixed income portfolio management, and investment infrastructure and technology. ESIC also provides independent research on these topics. Over the past 15 years, Mr. Schwartzman has played a key role in the growth of the ETF industry, having managed teams, portfolios, and investment process initiatives for BlackRock and SSGA.  

Disclaimers: ESIC seeks to, and may have in the past, currently, or in the future, provide paid advisory services to companies in the ETF ecosystem, including but not limited to issuers, index providers, analytics and data vendors, and market makers. Any views expressed are solely of the author and should not be construed as investment advice. 

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