Source: Marketwatch
The Vanguard Effect
November 16, 2015 2:00pm by Barry Ritholtz
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“The biggest sin in my family was paying retail”
– Woody Allen
One of the most revealing charts you have ever published. Remarkable.
According to BlackRock, a couple of the iShares small cap funds — IWO and IWM — offset more than 100% of their management fee with securities lending revenue.
Securities lending is probably part of the explanation for Vanguard funds with miniscule fees of 0.04% and 0.05%. It’s a race to the bottom!
Just kidding. Securities lending is collateralized, so the risk of loss should be low.
Senior loan?
https://www.invesco.com/portal/site/us/financial-professional/etfs/product-detail?productId=BKLN#tab_ff2
Demand for these types of loans has been rising because they offer high yields compared to Treasuries etc. However, we know that the banks making these loans that they then package and sell would never, ever reduce their lending standards to meet demand just because they can make fees from doing that. They are far too ethical and focused on customer service to do that.