Feb
18
Hedge Funds Will Pay for You to Own Small-Cap ETFs
BySecurities lending to short sellers has some exchange-traded funds outperforming the index they track.
With many exchange-traded funds already dirt cheap, everyone is waiting for the first free ETF. Turns out, it’s already here.
In certain pockets of the industry, ETFs are consistently beating the return on the indexes they’re meant to track. Theoretically, an ETF should lag its index by roughly the amount of its fee to investors. But that doesn’t account for revenue from securities lending. ETFs can lend out as much as 33 percent1 of their equity holdings to short sellers in return for a small fee. ETFs can then use that revenue to offset the expense ratio…
