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Fees cut on popular ETFs. Investors win!

Vanguard’s Australian Shares ETF (VAS) and iShares S&P/ASX 200 ETF (IOZ) have recently had their fees cut, bringing them closer to A200 in cost. We take a look.

By ETF Watch - Jun 25, 2019

When Betashares launched their Australia 200 ETF (A200) a little over a year ago, they broke new ground in index investing in Australia. With fees of 0.07% per annum, it was the lowest cost Australian focused ETF by far, at 50% of the cost of its nearest competitor, the Vanguard Australian Shares ETF (VAS), with fees of 0.14% per annum.

Fast forward a little over a year, and it is clear that A200’s low fees have struck a chord with investors. Since its launch in May 2018, it has had $546 million in net flows into the fund, second only to Vanguard’s VAS and miles ahead of its other major competitors, iShares S&P/ASX 200 (IOZ), with $59 million in inflows and Statestreet’s SPDR S&P/ASX 200 Fund (STW) which actually recorded the second highest net outflow of $182 million.

Fee cuts on Core ETFs, VAS and IOZ

The ETF issuers have clearly seen the investor appetite for low cost index options. In a win for investors, over the last few days some fee reductions have been announced.

Firstly, iShares snuck through a fee reduction on their $1.3 Billion IOZ, cutting fees from 0.15% to 0.09%, putting them within a whisper of A200’s fees, and cutting about $800,000 off their annual fee revenue.

Not to be beaten, the following day Vanguard announced a cut to VAS’ fees, which have been reduced from 0.14% to 0.10%, bringing the $3.9 Billion fund to within 0.03% of A200’s fees and forcing Vanguard to give up around $1.5 million in fee revenue.

This leaves Statestreet’s STW the only one of the large core Australian ETFs with a fee that is now looking quite expensive, at 0.19% per annum, or almost twice that of its nearest competitor. Unsurprisingly, it is STW which has seen a net outflow of funds over the last year, whilst A200, at about 40% of the cost has boomed. We can only expect Statestreet have a fee cut not too far away or we’ll be sure to see them lose the mantle of Australia’s largest ETF, at $3.9 Billion in size before too long.

More fee cuts on other funds

Vanguard and iShares have cut fees on a number of other ETFs too, listed below:

  • iShares Core MSCI World All Cap ETF (IWLD) – 0.09%, down from 0.16%
  • iShares Core MSCI World All Cap (AUD Hedged) ETF (IHWL) – 0.12%, down from 0.19%
  • Vanguard US Total Market Shares Index (VTS) – 0.03%, down from 0.04%;
  • Vanguard All-World EX US Shares Index (VEU) – 0.09%, down from 0.11%.

A race to zero fees?

There’s clear evidence that fees matter when it comes to ETFs. The much larger and popular US ETF market has seen its first zero fees ETFs launched. A range of core ETFs by Fidelity, aiming to use these as marketing tools to get investors using Fidelity products (the catch is that you need a Fidelity brokerage account to buy them).

We’re not expecting to see zero fee ETFs any time soon, but we think we haven’t seen the first ETF fee cuts this year. Pressure is on ETF providers to compete on fees, and this is only good news for investors!

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[…] one spot, with almost $800 million in flows. Already offering low fees, Vanguard has recently lowered its fees from 0.14% to 0.10% pa due to pressure from Betashares super low cost […]

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