Jose Garcia-Zarate

For the chop: ETF fee cuts set to persist

The ETF fee war shows no sign of abating. On the contrary, fee cuts have become part and parcel of life in ETF-land. Europe still lags behind the US when it comes to aggressive price-cutting. On this side of the Atlantic, we have yet to see zero-fee funds, let alone funds that actually pay investors, albeit temporarily, for the honour of holding them. Still, it’s clear that the only direction for ETF fees in Europe is south.

ETF demand: Americans are the hares to Europe’s tortoises

Investor interest in passive investment continues to grow at a healthy clip across the globe, and investors in ETFs are leading the charge into passive funds. This is particularly the case in the US, where ETFs have become akin to a default investment option.

In the UK and mainland Europe, the trend is also positive. Flows into ETFs in the first four months of 2019 totalled €30 billion (£26.5 billion). The value of assets invested in ETFs in Europe is nearing €800 billion (£710 billion), up from €200 billion (£175 billion) at the beginning of the decade.

What you need to look at before investing in a tracker fund or ETF

The growth of the exchange traded fund market is relentless. There are already close to 2,300 products on sale to UK investors, which provide all sorts of market exposures. And the number of ETFs on offer is set to increase, as both long-established players and asset managers looking to enter the ETF space fight for a slice of the pie.

Few can dispute the benefits – chief among them low cost – that ETFs bring to investors. However, product proliferation is making the task of ETF selection rather daunting.