Industry Updates

VanEck to merge global equity ETF into ESG equivalent following string of outflows

The merger will create a €408m global ESG ETF

Theo Andrew

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VanEck is set to merge its global equity ETF into a ESG equivalent after suffering a prolonged period of outflows.

Effective 15 October, the €314m VanEck Vectors Global Equity Weight UCITS ETF (TGET) will merge into the VanEck Vectors Sustainable World Equal Weight UCITS ETF (TSWE), creating a €408m global ESG ETF.

The ETF issuer said the reason for the decision was due a string of outflows from TGET over the past five years. The ETF has seen its assets decrease from €520m in December 2016 to €314m “leading to higher costs for the investors given its degressive fee model”.

The total expense ratio (TER) for TGET is capped at 0.2% but under the current model, fees decrease the more assets under management the ETF holds.

As a result of the merger, TSWE will see its total expense ratio (TER) reduce from 0.30% to 0.20%.

VanEck added that an increasing demand for sustainable investment solutions and “overlapping investment policies” was also behind the decision to merge.

The two ETFs are both global diversified equity ETFs with roughly 250 stocks – both with an equally weighted index – that carry a 40% cap on North America, Europe and Asia regions.

TSWE will continue to track the Solactive Sustainable World Equity index, unlike the Solactive Global Equity index tracked by TGET, which follows sustainability criteria based on the United Nations Global Compact principles and specific exclusions.

The firm said in a statement: “These sustainable characteristics are becoming more and more the norm for investors leaving less room for mainstream products.

“VanEck expects demand for TSWE will substantially increase going forward whereas the demand for the TGET will further deteriorate going forward.”

In April, VanEck become the second issuer to list a hydrogen economy ETF in Europe with the launch of the VanEck Vectors Hydrogen Economy UCITS ETF (HDRO) on the London Stock Exchange.

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