Ratios Creep Up

While exchange-traded funds (ETFs) continue to be a good deal for financial advisors and their clients, expenses aren’t as cheap as they used to be.

The total number of U.S. listed ETFs crossed 500 during the second quarter and assets throughout the industry approached the $500 billion threshold. However, expense ratios crept higher during the second quarter to an average of just under 0.5 percent.

Over the quarter, the bond category was particularly active with 13 new funds added to its ranks. This group remains the least expensive in the industry, with an average ratio of just 0.20 percent. The number of bond ETFs has significantly increased this year because of new offerings from Vanguard and State Street Global Advisors.

Sector ETFs remained the largest category; over the past year, membership in the group has soared from 64 to 156 funds over the past year. The expense ratio average for this group edged upward from 0.48 percent to 0.52 percent. New sector funds recently launched include offerings from First Trust Advisors and XShares Advisors, which has a series of niche healthcare funds.