How do the expenses for an index ETF get paid?


Years ago when I first learned about ETFs my understanding was that they made money for the entities who were authorized to arbitrage between the the net asset value and the market price. There was/is a thing called creation units through which the arbitrager can assemble new shares of the etf to be sold into the market or disassemble shares to remove them from the market. Fine makes sense as a mechanism to keep the spread between NAV and Market Price connected, and sounds like a great way to make money

So. If this is correct my question is where does the money for the expenses accounted in the expense ratio come from? Is it paid by the arbitrager? Does it come from dividends paid by the underlying stocks?


Comments

Leave a Reply

Your email address will not be published. Required fields are marked *