Fierce competition drives disruption in global equity ETFs

Lower fees and Europe firsts

Tom Eckett

Global markets

ETF issuer giants continue to disrupt rivals and drive innovation in even the most plain vanilla exposures.

Over the past week, BlackRock, Amundi and DWS have all launched iterations of global equity ETFs despite the first MSCI World ETF launching in 2005 under the iShares brand which was run by Barclays Global Investors (BGI) at the time.

Amundi was the first to make its move, with the launch of Europe’s cheapest all-world ETF, the Amundi Prime All Country World UCITS ETF (WEBG).

With a total expense ratio (TER) of 0.07%, WEBG undercuts the Invesco FTSE All-World UCITS ETF (FWRA) which launched last year with a 0.15% fee.

Unlike rivals, the ETF tracks a Solactive index, a key reason why Europe’s largest asset manager can offer global exposure at such a competitive price versus the likes of MSCI and FTSE Russell.

Following this, DWS unveiled Europe’s first global ex-US ETF to add another building block for investors looking to adopt an even more targeted approach to US equities.

The Xtrackers MSCI World ex USA UCITS ETF (EXUS) tracks the MSCI World ex USA index which has a greater weighting to Japan, the UK and France as well as an overweight to low volatility and larger underweight to size and momentum.

Finally, BlackRock launched its third synthetic ETF, the iShares MSCI World Swap UCITS ETF (IWDS), a global equity strategy that offers exposure to the MSCI World Net TR index.

While DWS and Invesco already offer synthetic global ETFs, the move is significant given BlackRock’s negative stance against swap-based structures over the years.

Highlighting this, BlackRock chairman and CEO Larry Fink called out European rivals Lyxor and SocGen at a conference in New York for its use in synthetic ETFs in 2011.

“If you buy a Lyxor product, you are an unsecured creditor of SocGen,” Fink warned at a conference in New York.

The introduction of multiple swap counterparties and the exclusion of paying withholding tax on US dividends leaves synthetic global ETFs with a significant performance advantage versus physical ETFs.

Final word

While ETF innovation is usually reserved for areas such as thematics, plain vanilla passive ETFs continue to demand the most assets which is why the bigger players continue to lock horns on costs and exposure. As always, investors benefit the most.

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