In a move
to enhance competitiveness in the increasingly crowded retail trading sector,
State Street, the global asset management behemoth, has declared a substantial
reduction in fees on a group of its key Exchange-Traded Funds (ETFs). This move
might set the pace for an industry-wide trend toward more cost-effective ETF
offerings and was called by State Street’s representative “a massive win
for smaller investors.”
The firm
announced today (Tuesday) that it is slashing fees on ten of its core funds,
affecting almost half of the SPDR Portfolio ETF suite. These funds, which cover
a broad spectrum of financial markets, including US and foreign, represent
about $77 billion in total assets, as indicated by FactSet data. The most
significant fee reduction applies to the SPDR Portfolio S&P 500 ETF (SPLG),
a fund with approximately $20 billion under management.
This
reduction in the total expense ratio (TER) is intended to provide more value to
smaller, long-term investors who are the primary target of this ETF portfolio
suite. Interestingly, these funds have a lower per-share price than similar
offerings in the market, such as the SPDR S&P 500 Trust (SPY), making it
easier for investors to build diversified portfolios by purchasing full shares
of the funds.
“Low-cost
ETFs are attractive to buy and hold investors who want to limit the impact of
fees on the long-term performance of their portfolios,” Sue Thompson, the Head
of SPDR Americas Distribution at State Street Global Advisors, commented.
While the
SPY ETF, a popular trading tool among many institutional investors, has an
expense ratio of 0.0945% and trades at about $450 per share, the recently
reduced expense ratio for SPLG now stands at a mere 0.02% with a per-share
price of nearly $50.
Source: Yahoo Finance
Despite
this industry trend, Thompson has dismissed the idea of SPDR fund expenses ever
reaching zero. She cites the real costs associated with managing these funds,
but pledges the firm’s commitment to continually pass on its product’s
scalability savings to its customers.
“When
you look at where expense ratios were 15 years ago across the board to today,
this has been a massive win for investors. It has been a massive win for
smaller investors,” Thompson added.
Retail Investors Are
Paying Less
Fund costs
have been steadily downward for several decades across the entire
asset management industry. Investors have been the ultimate beneficiaries as
the ETF industry expands and draws assets from higher-cost mutual
funds. This is evident in the existence of some products with a sticker price
of zero for the expense ratio, such as the BNY Mellon Large Cap Core Equity ETF
(BKLC).
As reported in a press release disclosed to Finance Magnates in March, 90% of Gen Z investors place a higher emphasis on saving and investing rather than spending. With a substantial combined disposable income of approximately $360 billion, these investors acknowledge the significance of companies actively addressing environmental and social concerns. As a result, they tend to favor diversified investment products, such as ETFs, rather than focusing solely on individual stocks.
“As the ETF
marketplace becomes more competitive, investors are keeping an eye on cost as
an important component of their total cost of ownership. Our research shows
that over the course of a decade, a portfolio invested at the median cost of
US-domiciled mutual funds would have given up 8.2% of starting principal to
fees,” State Street commented in the press release.
Robinhood
was the first company aimed typically at the retail trader to shake the investment
industry to its foundations by promoting a commission-free trading model. This,
coupled with the coronavirus pandemic, which encouraged many people to try
their hand at trading, resulted in many traditional companies having to switch
to the same model.
In a move
to enhance competitiveness in the increasingly crowded retail trading sector,
State Street, the global asset management behemoth, has declared a substantial
reduction in fees on a group of its key Exchange-Traded Funds (ETFs). This move
might set the pace for an industry-wide trend toward more cost-effective ETF
offerings and was called by State Street’s representative “a massive win
for smaller investors.”
The firm
announced today (Tuesday) that it is slashing fees on ten of its core funds,
affecting almost half of the SPDR Portfolio ETF suite. These funds, which cover
a broad spectrum of financial markets, including US and foreign, represent
about $77 billion in total assets, as indicated by FactSet data. The most
significant fee reduction applies to the SPDR Portfolio S&P 500 ETF (SPLG),
a fund with approximately $20 billion under management.
This
reduction in the total expense ratio (TER) is intended to provide more value to
smaller, long-term investors who are the primary target of this ETF portfolio
suite. Interestingly, these funds have a lower per-share price than similar
offerings in the market, such as the SPDR S&P 500 Trust (SPY), making it
easier for investors to build diversified portfolios by purchasing full shares
of the funds.
“Low-cost
ETFs are attractive to buy and hold investors who want to limit the impact of
fees on the long-term performance of their portfolios,” Sue Thompson, the Head
of SPDR Americas Distribution at State Street Global Advisors, commented.
While the
SPY ETF, a popular trading tool among many institutional investors, has an
expense ratio of 0.0945% and trades at about $450 per share, the recently
reduced expense ratio for SPLG now stands at a mere 0.02% with a per-share
price of nearly $50.
Source: Yahoo Finance
Despite
this industry trend, Thompson has dismissed the idea of SPDR fund expenses ever
reaching zero. She cites the real costs associated with managing these funds,
but pledges the firm’s commitment to continually pass on its product’s
scalability savings to its customers.
“When
you look at where expense ratios were 15 years ago across the board to today,
this has been a massive win for investors. It has been a massive win for
smaller investors,” Thompson added.
Retail Investors Are
Paying Less
Fund costs
have been steadily downward for several decades across the entire
asset management industry. Investors have been the ultimate beneficiaries as
the ETF industry expands and draws assets from higher-cost mutual
funds. This is evident in the existence of some products with a sticker price
of zero for the expense ratio, such as the BNY Mellon Large Cap Core Equity ETF
(BKLC).
As reported in a press release disclosed to Finance Magnates in March, 90% of Gen Z investors place a higher emphasis on saving and investing rather than spending. With a substantial combined disposable income of approximately $360 billion, these investors acknowledge the significance of companies actively addressing environmental and social concerns. As a result, they tend to favor diversified investment products, such as ETFs, rather than focusing solely on individual stocks.
“As the ETF
marketplace becomes more competitive, investors are keeping an eye on cost as
an important component of their total cost of ownership. Our research shows
that over the course of a decade, a portfolio invested at the median cost of
US-domiciled mutual funds would have given up 8.2% of starting principal to
fees,” State Street commented in the press release.
Robinhood
was the first company aimed typically at the retail trader to shake the investment
industry to its foundations by promoting a commission-free trading model. This,
coupled with the coronavirus pandemic, which encouraged many people to try
their hand at trading, resulted in many traditional companies having to switch
to the same model.
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- Source: https://www.financemagnates.com//forex/a-massive-win-for-smaller-investors-state-streets-cuts-fees-on-etfs-worth-70b/
