] is being sued
by a group of pension plans in Tennessee for the fees related to ETF securities-lending programs.
But what if the math underlying the suit were wrong?
That's the theory posited by Dave Nadig of IndexUniverse
. The full numbers are outlined in detail within his story, but here is an analysis he made on one fund noted in the suit to make his point:
One of the funds that the lawsuit calls out as a signal example is the iShares Russell 2000 Value ETF (NYSEArca: IWN).
There’s no doubt that iShares did well lending out IWN. In fact, thanks to SEC filings, we know that BlackRock made exactly $3,258,389 in fees just from lending securities for that fund in the year ending March 31, 2012. Based on the 65/35 split, that means the fund made $6,051,294.
In that same year, the fund paid a total of $10,021,426 in investment advisory fees. In other words, the securities-lending program earned back 60 percent of the fee the fund would otherwise have paid.
He also raises the point: do the fees generate reckless behavior? Also, what kind if impact do they have on performance?
Nadig also suggests you read the suit itself
For more of his in-depth analysis on the issue, read his IndexUniverse
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