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I'm choosing an ETF, and reading this KII document, I'm not sure what this sentence means.

  1. Can anybody expand this language with an example?
  2. Is this typical for an ETF?

To the extent the Fund undertakes securities lending to reduce costs, the Fund will receive 62.5% of the associated revenue generated and the remaining 37.5% will be received by BlackRock as the securities lending agent. As securities lending revenue sharing does not increase the costs of running the Fund, this has been excluded from the ongoing charges.

Source

Ben Miller
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sscarduzio
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2 Answers2

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The quote you are asking about is a footnote to the fund expenses/fees, which is listed as 0.26%. I’m not completely sure, but I believe that this note is saying that the fund sometimes lends out its assets (as you might do for someone who is shorting stock), and the revenue generated by that activity might lower the expenses beyond the percentage listed. As a result, the expense number shown is a maximum.

Ben Miller
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When shares are borrowed for the purpose of shorting, a borrow is fee charged by the brokerage firm to a client who borrows the shares. If the broker does not have lendable shares in house, it will have to borrow the shares from another broker to effect this and the brokers will share the fee. Some brokers share a portion of this fee with the lender (owner) of the securities.

Further down the page in your link it says:

The Fund may also engage in short-term secured lending of its investments to certain eligible third parties. This is used as a means of generating additional income and to off-set the costs of the Fund.

Per the two links, if this ETF lends the shares, the Fund will receive 62.5% borrow fee, lowering operational costs.

Bob Baerker
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