ETFs claim that they track the market, rather than beat it. Yet the stock prices of ETF issuers themselves are doing a great job in beating the market. BlackRock’s stock is up 35% this year, compared with 18% on the S&P. State Street is up 25% and Invesco is up 21%. All the major issuers have beaten the market. So instead of buying an ETF that tracks the market, why not buy an ETF issuer that beats it?
Virtually all of corporate America benefits from the Trump tax cuts, but healthcare and tech are benefiting less. This is because they already pay low taxes and keep their cash overseas. In response to this, two of the most popular tech ETFs, PowerShares QQQ and State Street’s Technology Select Sector have seen more than $2bn in outflows as mutual funds reposition.
As Mifid II stalks, issuers have to decide whether to absorb the costs of research or pass them on to clients. Some have decided to absorb them but others are opting to pass them on. Bermuda-based Fidelity, one of the largest US money managers, has decided to pass them on to clients. But it won’t matter too much, the company has said. As research only represents a cost of 0.0228% on the $185bn that sits in its equity funds. The decision leaves Fidelity as one of the few money managers who have chosen to pass on research costs.