Exchange traded funds are cheaper than they look after taking account of hidden costs and profits, according to Christopher Aldous, chief executive of Evercore PanAsset, speaking at Financial News' ETF conference this week.

Using annualised data since funds' inceptions, supplied by Deutsche Bank's db x-trackers and iShares, he has found it is possible for ETFs to trade practically in line with indices, net of costs, after taking account of profits from stock lending and the way synthetic funds avoid tax on dividends.