on their products to get more competitive.
This in-fighting among issuers has been great news for investors who can choose the cheapest product from a plethora of funds available in the market. Amid this tug of war, State Street has recently slashed management fees on 41 of its SPDR ETFs.
Some of the products within the bond space that saw a cut in fees include SPDR Barclays Aggregate Bond ETF (LAG), SPDR Barclays Intermediate Term Treasury ETF (ITE), SPDR Barclays Long Term Treasury ETF (TLO), SPDR Barclays TIPS ETF (IPE) and SPDR Barclays International Corporate Bond ETF (IBND).
While the fees for LAG was cut by a little more than half (from 21 basis points to 10 basis points), the expense ratio for ITE and TLO was cut from 0.14% to 0.10% and for IPE from 19 basis points to 15 basis points. One of the issuer’s most popular product – SPDR Barclays Short Term Corp Bond ETF (SCPB) – saw a one basis point cut in fees to 0.12%.
Among the equity funds, products like SPDR S&P 400 Mid Cap Growth ETF (MDYG) and SPDR S&P 600 Small Cap Growth ETF (SLY) saw a fee cut from 25 basis points to 15 basis points. Some of the international sector ETFs like SPDR S&P International Financial Sector ETF (IPF) and SPDR S&P International Utilities Sector ETF (IPU) also saw a fee cut from 50 basis points to 40 basis points.
News is also doing the rounds that State Street has filed with the Securities and Exchange Commission to reduce fees on some of its most popular funds like Energy Select Sector SPDR (XLE) and Health Care Select Sector SPDR (XLV).
The issuer currently has more than 140 U.S. listed ETFs providing exposure to a range of asset classes including equities, bonds and commodities. The expense ratio charged by State Street ranges from 9 basis points to 70 basis points.
The recent price cut by State Street on a wide range of its products is clearly a signal of the cut throat competition within the space. Amid the mounting pressure, Cambria had come up with an ETF – Cambria Global Asset Allocation ETF (GAA) – that charges 0% management fees on a permanent basis in December last year. The fund charges 29 basis points as expense fees.
Moreover, in December last year Vanguard had lowered fees on 10 of its sector ETFs to 0.12%.
Thus, the series of recent fee cuts clearly highlight the fact that issuers have started realizing that expense ratio is one of the deciding factors for investors while choosing funds. This is particularly the case when two funds track similar, or even identical, indexes. Generally, the low-cost product goes past the high-cost product and leads in AUM making cost essentially the only big difference between the two funds.
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