Exchange-traded funds launched this year cost twice as much as their existing competitors, according to research by Financial News.
The average total expense ratio for the 179 ETFs – launched at the rate of almost one a day – is 67 basis points, compared with 32 bps for existing funds in the US, and 37 bps in Europe. According to research from Morningstar, ETFs managed by US asset manager Vanguard are on average 60 per cent cheaper than rival iShares, owned by US asset manager, BlackRock. Vanguard is currently planning to launch a new range of ETFs in Europe.
iShares, State Street Global Advisors and Vanguard dominate the market with a 70 per cent share. Smaller providers lack economies of scale and cannot compete on price with the larger firms in popular markets, and have concentrated on developing products in niche markets, which are more expensive. Axel Lomholt, head of product development for iShares in Europe, said: “The higher pricing within the industry reflects the fact that the more recent offerings have been in emerging market, commodity and other harder-to-access and esoteric markets”.
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