Management costs vs marketing costs

Last week’s Wall Street Journal had a short piece about the work of an exchange traded fund manager. While brief, it gives some obvious insight into why expense ratios for ETFs can be so much lower than those for traditional actively managed funds:

At 30 years of age, Hao-Hung (Peter) Liao leads a handful of portfolio managers at Van Eck Global who oversee some $24 billion in investor assets around the world. Mr. Liao’s rapid ascent—and the parallel success of his tiny team in handling its outsize mission—owe a great deal to the unique traits of the investments in which the team specializes: exchange-traded funds.

Such ETFs are easier to manage than index-tracking mutual funds. A single person or small team can oversee a long list of ETFs, as Mr. Liao and his team do. Indeed, 87% of Van Eck’s ETF assets are in the 38 funds run by Mr. Liao and his staff of three portfolio managers and analysts.