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ETF fee war shows signs of splitting as performance draws flows
FactSet’s Elisabeth Kashner says investors are increasingly buying higher-fee products in segments tied to yield, momentum, and recent results, rather than focusing only on expense ratios.
ETF flows are starting to split in a way that challenges the industry’s long-running fee-cutting narrative, according to Elisabeth Kashner, Director of Global Funds Research at FactSet. Kashner told ETF.com that in the first half of 2026, some areas of the market saw money shift toward pricier funds with strong recent performance, including segments such as actively managed large-cap growth and unconstrained bond funds. She said the behavior is consistent with investors chasing yield, momentum, or a hot theme, and evaluating funds based on track record rather than expense ratio.
At the same time, other parts of the ETF market appear to be following the older playbook, where low cost still tends to win. Kashner said “vanilla” beta and idiosyncratic factor or ESG offerings are still seeing demand that tracks the lowest-fee option, a dynamic that ETF.com characterized as a K-shaped market.
Kashner also pointed to examples that fit the new pattern, including PIMCO’s PYLD, which has delivered top-quartile returns despite higher fees than some cheaper peers. She added that early movers can lose their advantage quickly when investors shift diligence toward costs, but that switching is more difficult in active management than in plain index tracking.