Europe’s cheapest ETFs yet to take off

The two cheapest ETFs available on the European market are yet to attract major inflows highlighting the benefits of first mover advantage.

Back in April this year, JP Morgan Asset Management (JPMAM) threw its hat into the European fee war with the launch of a US equity ETF priced at just four basis points.

The JPM BetaBuilders US Equity UCITS ETF (BBUS) is competing against the likes of Lyxor’s Core Morningstar US UCITS ETF (LCUS) which launched back in Q1 2018 and passively tracks the Morningstar US Large-Mid Cap index. LCUS also has an expense ratio of only 0.04%.

Despite BBUS and LCUS offering exposure to the popular US equity market at such a low fee, neither ETF has gathered a significant volume of assets.

In the seven months BBUS has been trading, it has only grown its assets under management (AUM) to just over $10m. Similarly, LCUS’s AUM sits at $52m and has been trading for nearly 20 months.

Performance has not been an issue for either fund having produced significantly large returns in the first half of the year. By September’s end, LCUS had a year-to-date return of 23.9% and BBUS climbed 3.8% since its inception in April.

The US equity ETF market is a largely crowded market before either of these products launched. The iShares Core S&P 500 UCITS ETF (CSP1) launched in September 2010 and charges 0.07%, 3 basis points higher than BBUS and LCUS however, it has in excess of $30bn in AUM making it the largest ETF in Europe.

In addition to having a larger volume of assets, CSP1 has a slightly better performance with YTD returns of 24.9% by the end of Q3.

The timeliness of launching these products is less than ideal as the equity ETF market has seen record monthly outflows this year as a result of geopolitical events causing uncertainty amongst investors. Only time will tell whether or not these ETFs will attract more assets.

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