This ETF invests directly in Chinese companies in order to replicate the performance of the MSCI China A Inclusion Index. This fund may use derivatives to hedge currency risk.
Total beginner here so I’ve got loads of basic questions.
I’m trying to understand the role different individuals play in an index etf like this, and who all gets a cut. The people involved seem to include (as my best guess) Morgan Stanley (msci), Blackrock (ishares), the ETF manager(s), and obviously Freetrade. Do all of these parties get a cut of some sort?
The ‘Ongoing cost’ of 0.04%, is this charged monthly? And who does this go to?
Many thanks.
D
Firstly … it’s probably 0.40% not 0.04 … as far as I’m aware that fee will go directly to iShares… (BlackRock)… they will most probably have to pay some sort of fee to the index they track & exchange they list on.
Freetrade will make money on the actual trade … bid/ask spread.
The last part is dangerously incorrect.
Freetrade does not make any money from the spread. Never. In the case of ETFs, freetrade does not make any money from a trade (same goes for UK stocks).
The whole fee goes to the ETF provider to pay for maintenance, tech, people etc. There are no managers to pay, that’s kinda the whole purpose of an ETF automatically tracking an index. This is what makes it so cheap.
You will never see a charge, they just take it out of the fund on a continuous/daily basis.
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Thanks @SebReitz , I was under the assumption FT or any other broker got a cut of the spread…
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Thanks folks, so are Morgan Stanley the ones who create the relevant index?