More than a third of US-listed ETFs may not cover operating costs

The average fee ratio for new ETF developments rose to 0.63%, the highest since 2010, reflecting the industry's extreme fee competition, according to data from Bloomberg Think Tank and industry insiders. While cheap fees are good for investors, they are a challenge for issuers. The latest data shows that roughly one-third to more than half of all ETFs listed in the United States may not be able to cover operating costs. Fee competition in the ETF market is evolving into demand for high-fee, high-margin products. Meanwhile, the mutual fund industry faces the challenge of continued net closures as investors move to more cost-effective ETFs. The mutual fund industry is trying to adapt to this change in a number of ways, but mutual funds still have an advantage in the U.S. pension system.