From the April 2007 issue of Research Magazine • Subscribe!

April 1, 2007

Expense Ratios Creep Up

According to recent data, expense ratios for exchange-traded funds (excluding Merrill Lynch HOLDRs) edged upward during the middle of the first quarter, while the number of ETFs available exploded from 349 to 407 and the category as a whole approached the $600 billion AUM milestone.

The number of sector-based ETFs jumped from 64 to 127 over the past year. The expense ratio average for this group crept from 0.47 percent to 0.48 percent. In late January, New York City-based XShares Advisors introduced five niche healthcare funds with ratios of 0.75 percent.

The specialty group had the highest average expenses (0.91 percent) among all ETF categories. The group is dominated by ProShares, which recently launched 22 ETFs that offer leveraged long and short exposure to various Dow Jones U.S. sectors and carry expense ratios of 0.95 percent.

The fixed income category had the lowest average expense ratios among all ETF groups of just 0.18 percent. All 14 of the existing bond ETFs are under the iShares umbrella.

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Ron DeLegge is the editor of www.etfguide.com.

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