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Categorized | Financial

State Street fires back in ETF price war

Posted on September 30, 2014

The price war among exchange traded fund providers in Europe further intensified on Tuesday after State Street Global Advisors announced fee cuts averaging 20 per cent across 15 of its core equity and fixed income ETFs.

SSgA had previously avoided being dragged into the price war but its move means fee cuts have now been announced by all of the leading ETF providers in Europe including BlackRock, Deutsche Asset and Wealth Management, Lyxor, Amundi, UBS and Source.

    The new fees on the 15 SSgA ETFs now range between nine basis points and 55bp from 15bp to 65bp previously.

    Industry watchers noted that SSgA’s fee cuts mean that the new charges for its European-listed ETFs were still higher than those for directly competing products offered by some rival managers.

    Alexis Marinof, head of SPDR ETFs for Emea, said that headline fees were just “one piece of the puzzle” for investors who also considered the underlying benchmark, trading costs and tracking error in assessing the total cost of ownership when choosing an ETF.

    The biggest reduction was made on the SPDR S&P 500 exchange trade fund, the world’s largest ETF where fees have been chopped to nine basis points from 15bp previously.

    Peter Sleep, a senior portfolio manager at 7IM, who uses both ETFs and index trackers, said that fees for European listed ETFs tracking the S&P 500 index averaged around 40bp three years ago so it was clear that price competition was driving costs in Europe lower.

    “This is very welcome indeed,” said Mr Sleep.

    SSgA is the second largest ETF provider globally, a position that it is in imminent danger of losing to its faster growing rival Vanguard, which has been more aggressive in cutting fees in recent years.

    In Europe SSgA is ranked as the eighth-largest provider with assets of $10.5bn, according to ETFGI, a consultancy. However, this position is also under threat from Vanguard, which has built up European ETF assets of $10.3bn and moved up to ninth spot.

    Vanguard’s European ETF operations have gathered net inflows of $5.6bn so far this year, substantially more than SSgA which has attracted $1.8bn.

    Mr Marinof, however, insisted that SSgA’s fee cuts were “neither too little nor too late” to effectively counter competition from Vanguard and other rivals.