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> and Blackrock keeps ~half. This is untrue. Per iShares(https://www.ishares.com/us/literature/brochure/securities-lending-unlocking-portfolios-en-us.pdf https

> and Blackrock keeps ~half. This is untrue. Per iShares(https://www.ishares.com/us/literature/brochure/securities-lending-unlocking-portfolios-en-us.pdf https://www.ishares.com/us/literature/brochure/securities-le...): > Q: How much of the securities lending proceeds are paid to iShares ETFs? > A:. iShares ETFs receive 71.5-80% of the income generated from securities lending depending on the asset class held. For example, iShares ETFs that predominantly hold US equities receive 71.5% of the income from securities lending. All other funds (i.e., fund-of-funds and funds that invest predominantly in fixed income or international equities) receive 80% of the income from securities lending. Once the aggregate securities lending income exceeds a certain income threshold amount, each iShares ETF will receive an increased percentage of the income above original levels, i.e. from 71.5% to 75% for US equity iShares and from 80% to 85% for all other iShares, for the remainder of that calendar year. By the way, Fidelity isn't making money off of securities lending on these funds, or at least has pledged not to. I still wouldn't use the funds, though.

whitepoplar 8y ago
Thanks for the correction. Fixed.
p10_user 8y ago
Curious, why wouldn’t you use these funds? Do you still prefer ishares or vanguard?
- whitepoplar 8y ago
  Not parent, but I wouldn't use these funds because there's a fundamental conflict of interest. Fidelity is a private company that seeks to profit from its customers. Vanguard is a company owned by its customers. What happens in the future if passive indexing falls out of favor, there's an exodus out of index funds, and Fidelity jacks up fees? If you're investing in a taxable account, you'd (presumably) incur a capital gain to leave the fund. At Vanguard, expenses may increase, but they won't seek to profit off of you. In a tax-advantaged account, I suppose the Fidelity funds are fine. I'm curious to hear tanderson92's answer, though.
  - scarface74 8y ago
    Not parent, but I wouldn't use these funds because there's a fundamental conflict of interest. Fidelity is a private company that seeks to profit from its customers. Vanguard is a company owned by its customers There is always a profit motive. The company itself may be customer owned but the employees are still trying to make money. I’m not saying that it’s wrong. It just is.
    - tanderson92 8y ago
      It is true, but I think it's reasonable to suspect that principal-agent problems are less of a concern when you have non-collaborating individuals trying to extract money from an institution which doesn't structurally have a principal-agent problem than in the situation where the corporation itself poses a principal-agent problem with respect to its customers.
    - whitepoplar 8y ago
      True! Case in point: Vanguard's advisory services and their actively managed funds.
- tanderson92 8y ago
  If forced to use Fidelity as a brokerage I would prefer iShares; however, I would prefer to not use Fidelity. I do most of my investing in non-retirement accounts and as a result tax efficiency is a concern. For this, ETFs (by any provider) and Vanguard mutual funds are typically superior to straight index mutual funds. The reason Vanguard mutual funds are unique in this respect is that they hold a patent allowed assets to be comingled between their ETF and mutual fund share classes, so the superior tax efficiency aspects of the ETF can be shared with the mutual fund (and vice versa). Also, Vanguard as a corporation is owned by its fund shareholders as opposed to external shareholders while Fidelity is owned by a private group. I don't trust any company enough to lock up my money with them and possibly have to pay capital gains tax to switch later, if they decide to raise fees or make the investment not align with shareholders in some respect. As whitepoplar says, they're a profit-seeking entity. Due to the inverted corporate ownership structure of Vanguard this is not a concern. This argument also applies to iShares.
  - komali2 8y ago
    >The reason Vanguard mutual funds are unique in this respect is that they hold a patent allowed assets to be comingled between their ETF and mutual fund share classes, so the superior tax efficiency aspects of the ETF can be shared with the mutual fund (and vice versa). Wait, what? What does this actually look like for you on your taxes? This sounds like something that would be out of your hands/tax responsibility.
    - tanderson92 8y ago
      The way this shows up on your taxes is that Vanguard stock mutual funds (almost) never make capital gains distributions, while other mutual fund companies do. Capital gains distributions are taxed, and are inefficient as they cost you money.
    - zrail 8y ago
      Most of Vanaguard's ETFs are just another class of the overall mutual fund. So for example, the Vanguard Total Stock Market Index Fund has four (I think) share classes: Investor, Admiral, Institutional, and ETF. Vanguard arranges things such that shares of stock in the underlying fund that have lots of built-in gains are shoved into ETF shares, which means they don't have to sell them when people redeem shares of the mutual fund classes. tl;dr: basically they just never have to sell shares with built-in capital gains so you rarely see a capital gains distribution when you use Vanguard index funds.

whitepoplar 8y ago

Thanks for the correction. Fixed.

p10_user 8y ago

Curious, why wouldn’t you use these funds? Do you still prefer ishares or vanguard?

whitepoplar 8y ago
Not parent, but I wouldn't use these funds because there's a fundamental conflict of interest. Fidelity is a private company that seeks to profit from its customers. Vanguard is a company owned by its customers. What happens in the future if passive indexing falls out of favor, there's an exodus out of index funds, and Fidelity jacks up fees? If you're investing in a taxable account, you'd (presumably) incur a capital gain to leave the fund. At Vanguard, expenses may increase, but they won't seek to profit off of you. In a tax-advantaged account, I suppose the Fidelity funds are fine. I'm curious to hear tanderson92's answer, though.
- scarface74 8y ago
  Not parent, but I wouldn't use these funds because there's a fundamental conflict of interest. Fidelity is a private company that seeks to profit from its customers. Vanguard is a company owned by its customers There is always a profit motive. The company itself may be customer owned but the employees are still trying to make money. I’m not saying that it’s wrong. It just is.
  - tanderson92 8y ago
    It is true, but I think it's reasonable to suspect that principal-agent problems are less of a concern when you have non-collaborating individuals trying to extract money from an institution which doesn't structurally have a principal-agent problem than in the situation where the corporation itself poses a principal-agent problem with respect to its customers.
  - whitepoplar 8y ago
    True! Case in point: Vanguard's advisory services and their actively managed funds.
tanderson92 8y ago
If forced to use Fidelity as a brokerage I would prefer iShares; however, I would prefer to not use Fidelity. I do most of my investing in non-retirement accounts and as a result tax efficiency is a concern. For this, ETFs (by any provider) and Vanguard mutual funds are typically superior to straight index mutual funds. The reason Vanguard mutual funds are unique in this respect is that they hold a patent allowed assets to be comingled between their ETF and mutual fund share classes, so the superior tax efficiency aspects of the ETF can be shared with the mutual fund (and vice versa). Also, Vanguard as a corporation is owned by its fund shareholders as opposed to external shareholders while Fidelity is owned by a private group. I don't trust any company enough to lock up my money with them and possibly have to pay capital gains tax to switch later, if they decide to raise fees or make the investment not align with shareholders in some respect. As whitepoplar says, they're a profit-seeking entity. Due to the inverted corporate ownership structure of Vanguard this is not a concern. This argument also applies to iShares.
- komali2 8y ago
  >The reason Vanguard mutual funds are unique in this respect is that they hold a patent allowed assets to be comingled between their ETF and mutual fund share classes, so the superior tax efficiency aspects of the ETF can be shared with the mutual fund (and vice versa). Wait, what? What does this actually look like for you on your taxes? This sounds like something that would be out of your hands/tax responsibility.
  - tanderson92 8y ago
    The way this shows up on your taxes is that Vanguard stock mutual funds (almost) never make capital gains distributions, while other mutual fund companies do. Capital gains distributions are taxed, and are inefficient as they cost you money.
  - zrail 8y ago
    Most of Vanaguard's ETFs are just another class of the overall mutual fund. So for example, the Vanguard Total Stock Market Index Fund has four (I think) share classes: Investor, Admiral, Institutional, and ETF. Vanguard arranges things such that shares of stock in the underlying fund that have lots of built-in gains are shoved into ETF shares, which means they don't have to sell them when people redeem shares of the mutual fund classes. tl;dr: basically they just never have to sell shares with built-in capital gains so you rarely see a capital gains distribution when you use Vanguard index funds.