Securities lending gives iShares ETF the edge
24 March 2017 Chicago
Image: Shutterstock
Revenue generated from the securities lending programme of the iShares ETF has allowed it to be one of US investment research firm Morningstar’s “highly rated exchange-traded funds (ETF)”.
The ETF, which tracks the Bloomberg Barclays Euro Government Inflation Bond Index, is physically replicated and levies a slightly higher ongoing charge of 0.25 percent.
In a research note on the effect of rising EU inflation on ETFs, Morningstar said: “At first sight, the fee looks a bit toppy.”
“However, its tracking difference has routinely come in below the ongoing charge, partly thanks to revenues generated by securities lending.”
The iShares ETF lent out an average of 28 percent of its assets for a net return to the fund of 4 basis points last year.
The research firm noted that “inflation in the eurozone has spiked markedly in the space of a few months”, which adds to the attractiveness of ETFs and traditional index funds that can provide exposure to the market of eurozone inflation-linked bonds.
The ETF, which tracks the Bloomberg Barclays Euro Government Inflation Bond Index, is physically replicated and levies a slightly higher ongoing charge of 0.25 percent.
In a research note on the effect of rising EU inflation on ETFs, Morningstar said: “At first sight, the fee looks a bit toppy.”
“However, its tracking difference has routinely come in below the ongoing charge, partly thanks to revenues generated by securities lending.”
The iShares ETF lent out an average of 28 percent of its assets for a net return to the fund of 4 basis points last year.
The research firm noted that “inflation in the eurozone has spiked markedly in the space of a few months”, which adds to the attractiveness of ETFs and traditional index funds that can provide exposure to the market of eurozone inflation-linked bonds.
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