BNY Mellon’s long-awaited ETF business is going live next week, with its first eight ETFs set to begin trading in New York on Tuesday.

As part of its opening foray, the company is listing five equity and three bond ETFs – each of which targets highly competitive “core” sections of the market.

  • BNY Mellon US Large Cap Core Equity ETF (BKLC)
  • BNY Mellon US Mid Cap Core Equity ETF (BKMC)
  • BNY Mellon US Small Cap Core Equity ETF(BKSE)
  • BNY Mellon International Equity ETF (BKIE)
  • BNY Mellon Emerging Markets Equity ETF (BKEM)
  • BNY Mellon Core Bond ETF (BKAG)
  • BNY Mellon Short Duration Corporate Bond ETF (BKSB)
  • BNY Mellon High Yield Beta ETF (BKHY)

The funds are all market weighted. The equity ETFs track indexes from Morningstar, while the bond ETFs track Bloomberg indexes.

The prospectus does not state fees. However if the funds are to have any chance of holding assets they’ll have to be very cheap.

BNY Mellon introduces round the clock ETF trading

BNY Mellon went on an ETF specialist hiring spree in mid-2019, poaching ETF specialists from rival companies such as JP Morgan. More BNY Mellon ETFs are expected to list later this year.

Analysis – too late...?

This is a very late arrival to the core US ETF market. In 2020, core US ETFs are all going for low single digit basis point fees. While the spreads are likewise in the low single digits. Making a late entry even less attractive, core US ETFs are locked in a state of perpetual competition against Vanguard, the not-for-profit, which is set on bringing fees as close as possible to zero.

Has Vanguard won the ETF fee war?

If these funds are to have a snowflakes chance of gathering and holding assets, they'll need to be run on tiny fees and find a way to get spreads down super fast.

One suspects that the early assets from these ETFs will be cannibalised from other parts of BNY Mellon's asset management business. JP Morgan did something similar.

Likewise one suspects that the motive for listing these funds cannot be – or cannot just be – the profits they generate. They might be run as loss leaders (like Charles Schwab's).