According to Eric Balchunas, a high-fee active fund showing less than 40% active share indicates near-benchmark positioning that may not justify premium fees, source: @EricBalchunas on X. Active share below roughly 60% is widely used to flag closet indexing, which raises the hurdle to outperform after costs, source: Morningstar Research. Most high-fee active equity funds underperform benchmarks net of fees over multiyear horizons, reinforcing the risk for holders of low active share products, source: S&P Dow Jones Indices SPIVA U.S. Scorecard 2024. These dynamics tend to redirect flows toward low-cost index ETFs and alternative exposures like Bitcoin ETPs, both of which recorded robust net inflows in 2024, source: Investment Company Institute and CoinShares Digital Asset Fund Flows 2024.

According to @EricBalchunas, the cheapest Hong Kong ETF that tracks U.S. stocks charges 28 bps, underscoring a fee disadvantage versus offshore markets (source: @EricBalchunas). He reports that regional allocators prefer London- or U.S.-listed ETFs over local HK funds primarily due to lower costs (source: @EricBalchunas). He also notes the Vanguard Effect—industry-wide fee compression driven by low-cost competitors—remains very early in Hong Kong, indicating limited fee competition to date (source: @EricBalchunas). For trading and allocation decisions, this observation aligns with a cost-driven tilt toward London/U.S. tickers versus HK counterparts until local pricing compresses (source: @EricBalchunas).