The ETF provider has announced it will cut the total expense ratio (TER) on its global emerging markets ETF from 45bps to 20bps. The move undercuts the TER of direct competitors, such as Vanguard’s Emerging Markets ETF which is offered at 29bps.
Most European ETF providers have cut prices in the past months. For example, just last month iShares cut the basis points for two of its S&P 500 trackers to 7bp, from 15bp, making it the least expensive product of its kind in the UK.
“At 20bps an emerging market ETF can hardly get cheaper. The next cheapest product in the market is Vanguard's,” Peter Sleep, senior portfolio manager at Seven Investment Management, said.
The recent “price war” means the European market is quickly catching up with the super low prices in the US. Vanguard’s US ETF is the cheapest at 15bps, while its European offering is 29bps.
“An emerging market ETF can’t go much lower than 15bps. The price includes custodians who look after the shares in each country. The cost of hiring US custodians in a single country is significantly cheaper, compared to emerging markets where there will be some 26 countries that require local custodians,” Sleep added.
Earlier this week Amundi announced a similar reduction for its Eastern Europe ex Russia funds ETF.
“This is really cheap. It is the only one that is Eastern Europe ex Russia that I know of. The others in the region, which mostly include Russia are priced up to 0.74% [the iShare MSCI Eastern Europe 10/40],” Sleep noted.
These changes came into effect on 29 April and impact both euro and dollar share classes.
