The reporting of total expense ratios (TERs) needs to reflect the true cost of ETFs to gain traction among IFAs, according to industry players.
Evercore Pan-Asset Management chief executive Christopher Aldous says there is a "foible" in the way ETFs report TERs. He says an equity based ETF, for example, could have a stated TER of 0.4%, which represents the annual management charge and should reflect the tracking error of the fund. However, he says the tracking error is often less than this, due to revenue from securities lending and other methods going back into the fund. Aldous says: "But providers haven't found a way of stating the true cost yet." He explains IFAs have to report the TER as stated, even if it does not accoun...
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