Analysis

Five most important ETF fee cuts in Europe’s latest price war

SSGA, DWS, UBS AM, Invesco and Global X made market-changing cuts over the last year

Lauren Gibbons

a group of coins

The last year has been marked by rife competition between ETF issuers, sparking a race to the bottom for fees across Europe.

Despite industry experts noting the fees had bottomed out, the regular cadence of cuts was seen across a broad range of asset classes and turned the heads of fund selectors across the continent.

State Street Global Advisors (SSGA) led the charge by slashing the fee on its S&P 500 ETF, creating the cheapest to track the flagship US index in Europe.

UBS Asset Management reduced the prices across hundreds of ETFs while favourable market conditions including anticipated rate cuts prompted a fee reduction for DWS’s gold ETC, making it the cheapest on the market.

With this in mind, ETF Stream analyses the five most important ETF fee cuts of the latest price war in Europe.

State Street offers Europe’s cheapest S&P 500 ETF

SSGA currently offers Europe's lowest-cost S&P 500 ETF after cutting fees last year in one of the biggest fee reductions in recent history.

The firm reduced the total expense ratio (TER) of the SPDR S&P 500 UCITS ETF (SPY5) from 0.09% to 0.03% in November 2023.

This adjustment makes SPY5 the cheapest S&P 500 ETF in Europe, surpassing competitors like the synthetically replicated Invesco S&P 500 UCITS ETF (SPXS) which has a 0.05% TER.

SSGA also lowered the fees on the SPDR S&P 500 EUR Hdg UCITS ETF (SPPE) to 0.05% and the SPDR S&P 500 ESG Leaders UCITS ETF (SPPY) to 0.03%. Following these adjustments, SSGA now boasts the cheapest currency-hedged and S&P 500 ESG ETFs in Europe.

The moves places SSGA in a neat position within the European ETF market, with the issuer noting Europe-domiciled ETFs invested close to $15bn a year in US equities over the past decade.

The firm said the cuts were made to drive market competitiveness but are also part of a broader initiative to improve accessibility for European investors.

DWS’s gold ETC takes top fee position

Last year, DWS became Europe’s cheapest gold exchange-traded commodity (ETC) provider after it cut the fees on the Xtrackers IE Physical Gold ETC Securities (XDGU).

XDGU was modestly cut from 0.12% to 0.11%, however, the move pushed the ETC ahead of its four biggest rivals – Amundi, Invesco, BlackRock and WisdomTree – which all offer gold ETCs at 0.12%.

The adjustment came at a time of favourable market conditions, with gold prices reaching a seven-month peak and potential rate cuts on the horizon.

This pricing follows a trend of fee reductions in the gold ETC market, particularly during the early COVID-19 period when firms aggressively competed for inflows, which led to the Invesco Physical Gold ETC (SGLD) halving its TER from 0.24% to 0.12%.

In March 2021, DWS cut fees across its currency-hedged physical gold ETCs, also making them the cheapest on the market.

DWS also slashed fees on 31 ETFs last December – including the £2.5bn Xtrackers Eurozone Government Bond UCITS ETF (XGLE) – as it continued its bid to leapfrog rival Amundi as Europe’s second-largest ETF issuer.

UBS AM slashes fees across hundreds of ETFs

UBS AM made a sweeping cut of over 200 ETFs in January, the most notable of which was on its global equity ETF.

It cut the fee on the £952m UBS ETF MSCI World UCITS ETF (UC55) by two-thirds to 0.10%, ahead of the Xtrackers MSCI World UCITS ETF (XDWL) which has a 0.12% fee.

The asset manager's broad sweep of fee reductions came after it suffered $715m ETF outflows in 2023, the largest across the eight-largest issuers in Europe, according to data from ETFbook.

Furthermore, UBS AM added the bank’s acquisition of Credit Suisse last March has enabled economies of scale.

Clemens Reuter, head of ETF and index fund client coverage at UBS AM, said: “We are able to reduce the cost of ownership across a wide range of our ETFs while maintaining our commitment to the highest quality.”

Invesco launches cheapest global ETF

While technically not a fee reduction, Invesco marked its entry into the global equity price war by launching Europe’s cheapest global ETF last June.

The Invesco FTSE All-World UCITS ETF (FWRA) was launched with a TER of 0.15%, undercutting its rivals SSGA and BlackRock.

FWRA was priced at two basis points lower than SSGA's SPDR MSCI ACWI IMI UCITS ETF (SPYI) and below BlackRock's iShares MSCI ACWI UCITS ETF (SSAC).

FWRA hoped the move would capture market interest in global equities. The ETF tracks the FTSE All-World index, which covers 4,000 companies from 49 markets.

Invesco said it can afford to keep its TER lower by using a sampling strategy, which incorporates quantitative analysis to select securities using factors such as country weights, industry sector weights and liquidity.

This means it will hold a smaller number of constituents that are in the index while replicating its performance as closely as possible.

Global X responds to BlackRock copper launch

Last June, Global X reduced the total expense ratio of its Global X Copper Miners UCITS ETF (COPX) from 0.65% to 0.55%, matching the fee of BlackRock's copper fund that was launched shortly before.

Global X intended to stop investors from defecting from its $51m ETF to BlackRock's product. The two strategies are the only copper miners ETFs on the European market, with Global X launching COPX in November 2021.

Despite launching COPX in November 2021, Global X responded quickly to BlackRock's entrance, which unveiled the iShares Copper Miners UCITS ETF (COPM) on 21 June.

The move looks to have had limited impact so far, with COPX's assets under management (AUM) falling by $7m since the fee cut, despite posting 9.2% returns over the past year.

BlackRock launched COPM intending to target the net-zero transition, capitalising on copper's vital role in renewable energy and electrification.

As demand surges, JP Morgan forecasts a 54% increase in copper supply is needed by 2030 to meet net-zero goals.

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