Another exchange-traded fund (ETF) price skirmish has broken out in Australia with BetaShares reclaiming the low ground just days after an aggressive fee cut by BlackRock.
BetaShares dropped the annual management fees on its flagship Australian shares index ETF last week by almost half to 0.04 per cent (from 0.07 per cent) in response to the BlackRock move.
Earlier BlackRock has slashed the price of the iShares Core S&P/ASX200 ETF to 0.05 per cent compared to the previous 0.09 per cent.
The Australian shares index ETF market is hotly contested between iShares, BetaShares and Vanguard (which has kept its comparable ETF fee at 0.1 per cent for now).
In a statement, BetaShares said: “Almost four years ago, A200 launched as the lowest cost Australian shares ETF on the ASX, with a management fee of 0.07% p.a., and rapidly gained popularity. In November 2020, A200 broke the record for the shortest time taken for an Australian ETF to pass $1 billion in assets. A200 now has over $2.6 billion in assets under management.”
The iShares Australian equities ETF reported assets under management of about A$4 billion while the Vanguard Australian Shares Index ETF holds almost A$12.5 billion.
BlackRock also lowered fees on the iShares Core Composite Bond ETF to 0.1 per cent from 0.15 per cent, previously.
Jason Collins, BlackRock deputy head of Australasia, said in a statement: “As both the largest investment manager and the largest ETF issuer by assets in the world, BlackRock is committed to passing on scale benefits to Australian advisers and investors.”
But the latest Australia ETF cost reductions follow years of fee compression in the sector globally as “companies compete for flows in an increasingly saturated market”, Bloomberg reported last December amid another round of discounts announced by BlackRock
“BlackRock’s cuts follow similar moves from Charles Schwab Corp., Vanguard Group Inc and State Street Global Advisors, who have all lowered costs by just a couple basis points apiece to near-zero levels over the past year,” Bloomberg reported.
The NZ-listed ETF monopoly, Smartshares, has lowered its fees somewhat (partly reflecting price reductions in underlying global funds) over the years despite the lack of a direct competitor.
Nonetheless, the NZX-owned ETF operator has faced pressure from unlisted passive providers (such as Kernel) and retail investment platforms that offer access to offshore-listed funds – either direct or pre-packaged.
For example, InvestNow launched a couple of portfolio investment entity (PIE) products under the Foundation Series brand last year priced on a par with the two underlying Vanguard ETFs of 0.03 per cent and 0.07 per cent, albeit with a 0.5 per cent transaction fee.
And this year NZ ETF-enthusiasts should have more like-for-like options with BetaShares expected to make its long-awaited debut on this side of the Tasman.
BetaShares, headed by Alex Vynokur, has yet to announce a replacement for its inaugural NZ employee, Thom Bentley, who departed the firm last August after about 18 months in the role.
The NZ product launch date was initially set for some time last year with a couple of broad index cut-price ETFs understood to be first on the BetaShares menu.