Global X has announced fee cuts for its USD High Yield Bond ETF (Currency Hedged) (ASX: USHY) and its US Treasury Bond ETF (Currency Hedged) (ASX: USTB).
The annual management fee for USHY has now been reduced from 0.40 per cent to 0.30 per cent, while the fee for USTB has been lowered from 0.20 per cent to 0.19 per cent.
According to Global X chief executive Evan Metcalf, the latest fee reduction, which comes amid a resurgence in demand for bonds, demonstrates the ETF provider’s commitment to providing investors with intelligent and timely solutions.
“We are pleased to offer competitive rates to Australian investors seeking to leverage favourable fixed-income opportunities presented by global economic conditions,” he said.
“We observe increased investor interest in the role of bonds within a portfolio, driven by historically robust yields, and a positive market outlook further fuelled by the anticipation of the US Federal Reserve initiating rate reductions in 2024.
“Meanwhile, US Treasury bonds, the world’s most heavily traded, offer stabilising properties in market environments anticipating peak growth and heightened challenges for equities.”
USHY tracks the Solactive USD High Yield Corporates Total Market Index (AUD hedged), which is market capitalisation-weighted and mirrors the performance of high-yield-rated corporate bonds issued in US dollars.
The ETF allows Australian investors to invest in high-yield bonds from developed countries across the world, while also diversifying their portfolio with global exposure.
USTB is a passively managed fund and tracks the iBoxx $ Treasuries Index (AUD hedged), which is market capitalisation-weighted and mirrors the performance of debt issued by the US government.
The fund offers Australian investors the opportunity to explore global market exposure while generating income and diversifying their portfolio.
Global X’s move follows a spate of fee reductions announced by ETF providers over the past year. In a recent interview with InvestorDaily, Stockspot founder and chief executive officer Chris Brycki said that fee reductions represent “great news” for ETF investors in Australia.
“Broadly, it’s great news when these fund providers reduce their fees, because the big beneficiary are the investors that have invested into these funds,” he said.
“It has been for decades now that ETFs have been generally pushing fees lower as they get more scale and size, and then passing on the benefits of that scale and size to the end investors. So overall, I think it’s great news for investors.”
But Mr Brycki suggested that ETF providers have been engaging in “a bit of gameplay” when it comes to fee cuts, especially for their Australian share ETFs.
“What we’ve noticed over the last few years is that, particularly in some of the areas like broad-based Australian shares where it’s very competitive, just offering a fund that’s one or two basis points less than the next guy gives you great PR credibility and ability to market your product,” he continued.
“Even though the difference is pretty minor, that headline is something that the big issuers really want to own, even though they may also have products in their portfolio that are much higher fee and have a much higher margin.”
According to Mr Brycki, ETF providers are “really battling it out” in the broad-based category of ETFs covering Australian shares, US shares, and global shares.
“But there is a lot less competition and a lot less going on in terms of price reductions at higher product, higher fee end of the spectrum,” he added.
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.