MER for ETFs

[Belli]

First Blackrock reduced its MER to 0.05% and now Betashares is getting into the act reducing its MER to 0.04% (from 0.07%.)

A race to the bottom?

http://www.asx.com.au/asxpdf/20230221/pdf/45lv27p4kt9bxt.pdf

 

[divs4ever]

that question was asked elsewhere a while back ( i don't automatically see this trend as a good thing , maybe it ultimately will be or maybe it will limit investor choices )

however i would like to ask a supplementary question

how will they continue to generate a profit ( for the company and staff ) , will they cut staff ( and other operating expenses ) or will services be cut , or will they do something else to generate cash-flow

ETFs becoming the dominant force in the share/bond markets have new traps and temptations

cheers

 

[frugal.rock]

however i would like to ask a supplementary question

how will they continue to generate a profit ( for the company and staff ) , will they cut staff ( and other operating expenses ) or will services be cut , or will they do something else to generate cash-flow

Could it be they have so many freakin products out there now that they can afford to do it?
Seemed for a while there, that a new (thematic) ETF was appearing every week...

 

[divs4ever]

Could it be they have so many freakin products out there now that they can afford to do it?
Seemed for a while there, that a new (thematic) ETF was appearing every week...

yes i had noticed that and wondered where the investor cash is coming from ( when the portfolio holds distinct stocks )

those ETFs that hold combinations of existing ETFs/managed funds well there are ways of doing that without splashing $10 million (plus ) in the open market , that might be more like several keystrokes

i haven't researched many ETFs recently , i love to go right into the white papers like the MVW ones , where possible to see why that product might work , effectively ( for me )

one might hope every ETF product had extensive research behind it rather than pick a reference index and attempt to track it closely , but if the recent MER price war continues , where do the $$$ get saved

 

[Belli]

Could it be they have so many freakin products out there now that they can afford to do it?
Seemed for a while there, that a new (thematic) ETF was appearing every week...

Apart from competitive pressures, volume and FUM are considerations as well as higher MERs on some products (thematics mainly) which are offered to suck in punters.

 

[Dona Ferentes]

Apart from competitive pressures, volume and FUM are considerations as well as higher MERs on some products (thematics mainly) which are offered to suck in punters.

The BlackRock IOZ iShares ETF tracks the S&P/ASX 200 index and Betashares’ A200 tracks the Solactive Australia 200 Index.

.... the two indices are different. At present, there are four companies in A200 that are not in IOZ, including Syrah Resources and Platinum Asset Management. And there are seven companies in IOZ that are not in A200, including AVZ Minerals and SmartGroup. (Liable to change)

Nuanced, perhaps, and probably not much different in outcomes. And as Beili hints at, there could well be a 'loss leader' approach to the pitch, with concepts like Core & Satellite dangled (with the exotic ETFs usually carrying much higher fees).

The ETFs offering such low fees are multi-billion in size, more likely to be in 'buy & hold' portfolios.

 

[divs4ever]

Nuanced, perhaps, and probably not much different in outcomes. And as Beili hints at, there could well be a 'loss leader' approach to the pitch, with concepts like Core & Satellite dangled (with the exotic ETFs usually carrying much higher fees).

at my percentage of held ETFs it would be a very small difference but how does that translate if you participate in the DRP , that extra unit of two each year will compound any franking credits ( when resisting a loss in spending power little amounts help as well )

the 'loss leader ' approach probably happens , but i would argue ' economies of scale ' would be more likely margins might be lower for that fund but total management income would still grow with the fund size and static costs should decline ( slightly ) per unit

and sure , using the passive index product as an introduction to the company and other more complex products is fairly standard practice ( for better or worse )

but how does this affect members who have 30% plus of their portfolio in assorted ETFs , does this alter decisions made ( in portfolio content or new investment cash )

sometimes little things are very important in ETF investments

 

[Belli]

From 3 July 2023, Vanguard will reduce the MER for VAS to 0.07%.

 

[Belli]

I had a look at the MER for a number of the broader based ETFs. Much to my surprise I noticed StreetTracks has, effective from 1 November, reduced the MER on the following:

STW to 0.05%
SYI to 0.20%
GOVT to 0.10%
WDIV to 0.35%
QMIX to 0.18%