ETF price war heats up

Leading exchange-traded product (ETP) investment managers - Vanguard, Betashares, BlackRock, and VanEck - which command about 70% of the Australian market, reduced their asset-weighted fees by 8% in the 12 months to March, according to Rainmaker Information.

Vanguard, the largest manager by assets under management (AUM), reduced its asset-weighted fees from 0.17% to 0.16% p.a. This was due to fee reductions on three products, representing 33% of its AUM. The largest of these, the Vanguard Australian Shares Index ETF, had its fee reduced from 0.1% to 0.07% p.a.

BlackRock had the largest percentage and absolute fee reduction, with its asset-weighted fee falling from 0.33% to 0.29% p.a. Rainmaker said this reduction occurred without any fee cuts on individual products, rather driven purely by investors preferring lower cost products.

For example, the iShares S&P 500 ETF, which has the lowest management free of any BlackRock product at 0.04% p.a., saw its asset allocation increase by two percentage points.

Betashares had the second largest fee reduction, both in absolute and relative terms. The asset-weighted management free of Betashares products fell from 0.44% to 0.4% p.a. Rainmaker said the reason for this lower fee was primarily due to the mix of assets moving towards lower fee products.

The three products with the largest increase in asset allocation had fees much lower than the asset-weighted average. The Betashares Global Shares ETF, launched in May 2023, has a fee of 0.08% p.a. and represents 2.3% of Betashares' total assets. Its currency hedged counterpart, also launched recently, has a fee of 0.11% p.a. and accounts for 1.7% of total assets. The Betashares Australia 200 ETF, its cheapest product with a fee of 0.04% p.a. increased its allocation from 11.4% to 13.4%.

VanEck had the third largest drop in asset-weighted fees, from 0.41% to 0.39% p.a.

Over the past year, VanEck reduced fees on four of its 38 products by an average of 0.25% p.a. that together constituted 6% of its managed assts. However, Rainmaker said the change in product asset allocation had little effect on overall asset weighted fees.

"This was primarily due to the success of its largest product, the VanEck MSCI World Ex-Australia Quality ETF, which increased its share of VanEck's product suite from 28% to 32%, and the fact the product has a management fee (0.4% pa) that was nearly the same as the overall asset-weighted fee," Rainmaker said.