The Big Picture: A Cost Comparison of Futures and ETFs

Discover the liquidity, low cost and capital efficiency of futures.

Today, as in the past, it’s cheaper to replicate the S&P 500 with futures than with exchange-traded funds (ETFs).

Updated for 2015, The Big Picture: A Cost Comparison of Futures and ETFs examines the all-in cost of replicating the S&P 500 total return via equity index futures and ETFs across a variety of use cases.

  • E-mini S&P 500 futures are shown to be more cost-effective than S&P 500 ETFs for leveraged, short and non-U.S. investors, across all time horizons.
  • For fully-funded investors, the optimal choice is a function of futures implied financing and investment time horizon. At the recent average roll level of 3mL -5.7bps, futures are cheaper than the ETFs by between 12.0 and 15.5bps.
  • Absent extreme richness of the futures roll, the cost advantage of futures over ETFs for foreign investors will hold true in periods of roll richness and cheapness mainly because this is an additional holding cost that only the ETF incurs.

Read the updated report, and discover the cost efficiency of E-mini S&P 500 futures – the preferred tool for replicating the S&P 500 total return.

Get the Big Picture

See what futures can do for your portfolio. Download The Big Picture: A Cost Comparison of Futures and ETFs and discover the cost-efficiency of futures.

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Separate Fact from Fiction

Not sure what tools are right for managing S&P 500 exposure?

CME’s E-mini S&P 500 futures:

  1. Trade seven times more per day than all S&P 500 ETFs combined
  2. Trade 2.5 times more per day than the entire U.S. ETF market
  3. Trade more before the U.S. cash market opens than all three S&P 500 ETFs trade all day
  4. Offer lower transaction costs and cheaper leverage for tactical, active, short, and leveraged investors
  5. Offer a more tax efficient investment for international investors

What Customers Are Saying

"Our clients look to us to find cost effective and flexible ways to manage portfolio exposure needs on a daily basis. For the vast majority of our clients, we have found that futures may provide them the greatest flexibility to fulfill short-term risk management and performance enhancement goals such as cash equitization and securitization, portfolio rebalancing, currency hedging and transition management."

— Jack Hansen, Chief Investment Officer, Parametric -Minneapolis Investment Center


"With S&P 500 futures, investors receive the total return of the S&P 500 index less a money market rate-based funding cost, yet are only required to pay a small initial margin up front - in sharp contrast to the capital commitment plus fees required to own the S&P 500 via an ETF. This allows innovative equity investors, such as PIMCO, an opportunity to outperform the equity market simply by seeking a return on the remaining capital in excess of money market rates."

— Sabrina Callin, Managing Director and StocksPLUS product manager, PIMCO