ETF Fees Fall in February as Assets Rise

March 22, 2005 ( - Increased competition is pressuring fees on exchange-traded funds (ETFs), according to data from Morgan Stanley.

Reuters is reporting that the listed and traded investment vehicles that track indexes of multiple asset categories have seen a decrease in fees after multiple banks slashed prices in February to attract business. In America, the data indicates that Vanguard was one of the leading fee cutters, reducing annual expense ratios on all 23 of its VIPERS ETF products (see  Vanguard Unwraps Three International ETFs ).

The trend has also been echoed in Europe according to Morgan Stanley, with Barclays Global Investors – the world largest ETF manager with 43.6% of the market – capping its annual fee on its iShares EuroStoxx 50 funds at 15 basis points. Deutsche Bank AG also entered the market in February and pushed down fees due to the increase in providers, Morgan Stanley reports. Indexchange, another provider, cut its fee from 50 to 15 basis points in February. Still, European ETFs cost more than their American counterparts, with average fees of 41 and 38 basis points annually, respectively.

ETFs are becoming increasingly popular, now accounting for around 25% of trading volume of US stock exchanges. Total assets in ETFs have grown by 1.7% over the year-to-date. At the end of February, 348 ETFs existed, with assets totaling $313.6 billion. The US has the lion’s share of assets, however, with $228.4 billion invested in US ETFs.