Van Eck moves to match BlackRock in Australia ETF price war

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US-based exchange traded fund provider VanEck has announced huge fee cuts for its Australia-listed global infrastructure and international property ETFs, after BlackRock undercut its rival by rolling out similar low-cost ETFs last month.

VanEck, the fourth-largest ETF provider in Australia as of the end of May, with A$12.7bn ($8.7bn) in funds under management, is the latest to join the escalating price war in the market.

The A$808mn VanEck FTSE Global Infrastructure (Hedged) ETF will be available to investors for an annual rate of 0.2 per cent, down 32 basis points from 0.52 per cent.

Meanwhile, management fees for the A$224mn VanEck FTSE International Property (Hedged) ETF have been slashed by 23 bps to 0.2 per cent from 0.43 per cent.

Both fee cuts will be effective as of July 3, the firm said in a statement.

Arian Neiron, VanEck’s Asia Pacific chief executive, said the decision to reduce fees was “part of a fee review” given the “strong interest” in the funds from investors.

The move openly challenges BlackRock’s iShares, the second-largest ETF provider in Australia as of May, which unveiled the iShares Core FTSE Global Infrastructure (AUD Hedged) ETF and iShares Core FTSE Global Property ex Australia (AUD Hedged) ETF at end-May for an annual management fee of 20 bps.

The two ETFs were marketed as the cheapest products for their respective strategies, according to BlackRock, with the management fee half the level of similar products in the Australian market.

The VanEck FTSE International Property (Hedged) ETF had previously been the cheapest global property ETF.

The VanEck FTSE Global Infrastructure (Hedged) ETF, which tracks the FTSE Developed Core Infrastructure 50/50 Hedged into Australian Dollars Index, was Australia’s first global infrastructure ETF.

It remains Australia’s largest fund under this strategy.

Vanguard, the largest ETF provider in Australia, this month said it would reduce fees on its Vanguard Australian Shares Index ETF — Australia’s largest ETF with about A$12bn in assets under management — from 0.1 per cent to 0.07 per cent on July 3 as part of its “ongoing commitment to investors” and its aim to “pass on any savings to investors where possible”.

This followed BlackRock’s decision in February to slash the annual management fee for its A$4bn BlackRock iShares S&P/ASX 200 ETF from 0.09 per cent to 0.05 per cent, a month after the world’s largest asset manager briefly lost its position as the second-largest ETF provider in Australia.

Betashares, Australia’s third-largest ETF provider, immediately responded by slashing fees on its Betashares Australia 200 ETF by 3 bps from 0.07 per cent to 0.04 per cent.

It then touted the strategy as “still the lowest-cost Australian shares ETF”, a position it claims to have had since its launch four years ago.

*Ignites Asia is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignitesasia.com.