Exchange-traded funds (ETF) manufacturer iShares has officially launched its new series of Australian equities funds, some of which charge lower fees than comparable products in the market.
The BlackRock-owned firm’s iShares MSCI Australia 200, iShares S&P/ASX High Dividend, iShares S&P/ASX Small Ordinaries and iShares S&P/ASX 20 ETFs went live on the Australian Securities Exchange (ASX) yesterday.
The iShares MSCI 200 ETF, which tracks the broad MSCI Australia 200 Index, charges an annualised fee of 0.19 per cent.
This compares to the 0.286 per cent annual cost for State Street Global Advisors (SSgA) SPDR S&P/ASX 200 Fund, which tracks the S&P/ASX 200 Index, and 0.27 per cent for Vanguard’s S&P/ASX 300-tracking Australian Shares Index ETF.
iShares also priced its high dividend ETF at 30 basis points per annum.
In contrast, rival high-income ETFs including the SPDR MSCI Australia Select High Dividend Yield and Russell High Dividend Australian Shares had fees of 0.35 per cent and 0.46 per cent, respectively.
iShares set a fee of 0.24 per cent on its new large-cap S&P/ASX 20 ETF and 0.55 per cent on the Small Ordinaries fund.
Morningstar ETF strategist Zac Wallis said pricing will become a critical point of difference in the ETF market. He said the ETF providers that charged lower fees on comparable products would stand to win more market share in the long term.
SSgA’s senior managing director in Australia Rob Goodlad said investors needed to take spreads into consideration.
“Cost is not just fees – you also have to take into account the on market buy/sell spread. SPDR 200 maintains the lowest on market spread with the most liquidity,” he said.
Russell Investments ETF product development director Amanda Skelly said while all of the dividend ETFs available offered good value for investors, Russell’s analysis showed each was differently designed and would result in a different performance pattern for investors.
“Russell’s intention, however, is to continue to review our price on [Russell High Dividend Australian Shares], and all future ETFs, on an ongoing basis,” she said.
