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State Street Global Advisors is cutting fees on two of its exchange traded funds in Europe to 3 basis points, making them “even more accessible and affordable”.
The total expense ratio for the $5.5bn SPDR S&P 500 Ucits ETF will be reduced from 0.09 per cent to 0.03 per cent, while the smaller $821mn SPDR S&P 500 ESG Leaders Ucits ETF will also charge 0.03 per cent, compared with 0.1 per cent currently.
The reduction in the annual charges of the Ireland-domiciled ETFs will make them the cheapest physically replicating European ETFs to track the US blue-chip index, SSGA said.
It will also mean that SSGA’s own monster $290bn SPDR S&P 500 ETF Trust (SPY) in the US charges more, at 0.0945 per cent.
Detlef Glow, head of research for Europe, the Middle East and Africa at Refinitiv Lipper, said the change was a “bold move” by SSGA as 3 basis points is “the lowest minimum fee” an asset manager can charge without losing money on an ETF.
Investors may well appreciate the move, Glow said, “as it might start another round of decreasing [total expense ratios] in the ETF segment”.
Among large ETFs in Europe with similar exposure, the Invesco S&P 500 Ucits ETF, which has $18.5bn in assets under management, has a TER of 0.05 per cent. BlackRock’s giant $61.9bn iShares Core S&P 500 Ucits ETF, Vanguard’s $38.6bn S&P 500 Ucits ETF and Amundi’s $8.2bn Lyxor S&P 500 ETF each charge 0.07 per cent.
The euro hedged share class of the SPDR S&P 500 Ucits ETF will also have its fees cut, down from 0.12 per cent to 0.05 per cent.
Glow said SSGA had a “good opportunity” to find success on the back of the changes because “investors are looking for products which are cheap and offering a high replication quality”, with the latter reflected in the rise in assets in SSGA’s S&P 500 ETFs.
He said investors’ knowledge of ETFs and their fee sensitivity has increased since DWS’s Xtrackers cut the fee on one ETF to zero in 2009.
“Investors are nowadays more educated with regard to additional income from securities lending, which is shared between the investor and the asset manager,” he added.
Matteo Andreetto, head of SPDR for Europe, the Middle East and Africa at the asset management arm of State Street, said the fee cuts were “significant” for his firm’s professional investors.
He said they were part of SSGA’s efforts to “make these products even more accessible and affordable without compromising on quality”.
“While these announcements enhance our market competitiveness, they also demonstrate our commitment to improving accessibility; delivering institutional quality investment solutions at competitive price points,” Andreetto added.
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The fee cuts come after the SSGA executive told Ignites Europe in 2021 that the rush to lower fees in the European ETF space had not resulted in providers expanding market share.
He said at the time that ETF providers had launched “low-cost building blocks” in core areas, such as US and European large-cap equities, often by shunning the best known index benchmark providers.
Andreetto noted, however, that pricing had not been a “driver of growth in the core equity space” for ETFs and that one reason why large fee cuts had not driven growth was because of the fragmented nature of European distribution.
*Ignites Europe is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at igniteseurope.com.