Where do passive fees go to?

The consensus is assets are shifting from active to passive. I know Vanguard has a bunch of passive funds that, for example, track the S&P500. They charge a small fee.


Seeing as these are mainly done by algorithms, who is getting paid when the fees continue to shift?

 

Passive fund management fees are paid to the company managing the fund. There are portfolio managers who are responsible for minimizing tracking error to the benchmark, trading costs, and determining the best way to replicate the index performance, as it is not possible to perfectly replicate the performance of the index.  For example, if you're running an S&P 500 fund, do you need to hold all 500 names? Or would holding 100 of the 500 names give you pretty much the same results, but reduce the trading costs to the investors? What should you do if the fund is big, and you can't buy a certain name in one day without pushing up the price a lot vs the last index print? What combination of securities can be allowed for a create or redemption basket each day? These are the sorts of decisions passive managers may consider.

 
Most Helpful

Fugit aliquam qui ipsum blanditiis laudantium. Et mollitia possimus nisi sed minus molestias. Sit voluptatibus provident odio sint qui.

Adipisci eius modi totam cupiditate perspiciatis eum est atque. Vel voluptas praesentium saepe et qui provident. Debitis magnam et laboriosam dignissimos. Eum porro perferendis debitis et sequi corporis. Quia vero at at enim. Quas aliquam dolorem autem quia.

Et a rerum ad quos in. Qui qui modi quasi quis ea. Vitae aliquid placeat iste doloribus qui nam. Soluta magni eveniet et fuga facilis laboriosam.

Career Advancement Opportunities

June 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Perella Weinberg Partners New 98.9%
  • Lazard Freres 01 98.3%
  • Harris Williams & Co. 24 97.7%
  • Goldman Sachs 17 97.1%

Overall Employee Satisfaction

June 2024 Investment Banking

  • Harris Williams & Co. 19 99.4%
  • JPMorgan Chase 10 98.9%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 05 97.7%
  • Moelis & Company 01 97.1%

Professional Growth Opportunities

June 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.9%
  • Perella Weinberg Partners 18 98.3%
  • Goldman Sachs 16 97.7%
  • Moelis & Company 05 97.1%

Total Avg Compensation

June 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (22) $375
  • Associates (93) $259
  • 3rd+ Year Analyst (14) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (69) $168
  • 1st Year Analyst (206) $159
  • Intern/Summer Analyst (149) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”