Effective 3 July, the management fees for both the VanEck FTSE Global Infrastructure (Hedged) ETF (ASX: IFRA) and VanEck FTSE International Property (Hedged) ETF (ASX: REIT) will drop to 0.20 per cent a year.
Arian Neiron, chief executive and managing director, VanEck, Asia-Pacific, said: “As part of a fee review, we have decided to reduce IFRA and REIT’s management fees. The new reduced fees will enable more investors to gain exposure to VanEck’s infrastructure and international property strategies”.
Mr Neiron added that following strong investor interest in VanEck’s infrastructure and international property funds, reducing the fees is planned to open the ETFs to a wider range of investors.
“IFRA gives investors access to a suite of global infrastructure companies which are well positioned to benefit from the estimated $60 trillion global outlay needed to upgrade aging utilities by 2035,” he said.
“With IFRA, investors receive attractive, stable income streams, often regulated and CPI-linked, which offer more defensive characteristics in high-inflation environments than other securities.”
According to VanEck, IFRA, which was Australia’s first global infrastructure ETF, tracks the FTSE Developed Core Infrastructure 50/50 Hedged into Australian Dollars Index, while REIT tracks the FTSE EPRA Nareit Developed ex Australia Rental Index AUD Hedged.
REIT gives investors access to a diversified portfolio of international property securities from developed markets (ex Australia) with returns hedged into Australian dollars, the fund manager added.
“We are confident that the new fees encourage more investors and their advisers to consider IFRA and REIT as diversifiers for their portfolios,” said Mr Neiron.
“We think these asset classes represent core exposures and these products are being used by investors as the market beta strategic asset allocation in portfolios. The new fees are consistent with our business objective of providing investors with opportunities to access the best investment outcomes.”
In February, BetaShares announced its decision to reduce the management fee on its Australia 200 ETF (A200) from 0.07 per cent to 0.04 per cent.
This came just one day after BlackRock announced that it had reduced the fee on its iShares Core S&P/ASX 200 ETF (IOZ) from 0.09 per cent to 0.05 per cent, alongside a fee reduction for the iShares Core Composite Bond ETF (IAF) from 0.15 per cent to 0.10 per cent.
At the time, Mr Neiron questioned the economic viability of these fee-cutting strategies long term, specifically relating to shares ETFs.
Speaking to InvestorDaily, Mr Neiron said: “We would say that the strategies tracking Australia’s largest 200 companies, that are currently involved in a price war, while are cheap for investors, may not be economically viable long term”.
Mr Neiron also added that being “for profit enterprises”, fund managers “need to ensure that the strategy is feasible to operate”.
“This means these strategies or funds should not become a ‘loss leader’ that perpetually needs to be subsidised by investors and/or assets in other strategies,” he said.
Following VanEck's fee reduction, Mr Neiron told InvestorDaily: “We maintain that, in the context of the longevity of a fund in our industry, charging low, single-digits isn’t viable and doing so would mean it would need to be subsidised by investors in their other funds. This is independent of fee reductions.”
Earlier this month, Vanguard also confirmed that the management fee on the Vanguard Australian Shares Index ETF (VAS) will be reduced from 0.10 per cent p.a. to 0.07 per cent p.a., effective from Monday, 3 July 2023.