Invesco lowers fees on USD and EUR corporate bond ETFs

Nov 7th, 2019 | By | Category: Fixed Income

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Invesco has lowered the fees on a pair of fixed income ETFs providing exposure to USD and EUR corporate bonds.

Invesco lowers fees on USD and EUR corporate bond ETFs

Invesco has lowered the fees charged on two of its fixed income ETFs providing exposure to USD and EUR corporate bonds.

The Invesco USD Corporate Bond UCITS ETF and Invesco Euro Corporate Bond UCITS ETF have had their expense ratios reduced by six basis points from 0.16% to 0.10%.

The funds track Bloomberg Barclays indices that cover fixed-rate, investment-grade bonds issued by industrial, utility, and financial companies globally.

The respective indices are the Bloomberg Barclays USD IG Corporate Liquidity Screened Bond Index and the Bloomberg Barclays Euro Corporate Index.

Eligible securities must have par amounts outstanding of at least $300m or €300m, respectively, and at least one year remaining until maturity.

The USD bond ETF is listed on London Stock Exchange and SIX Swiss Exchange in US dollars and on Borsa Italiana in euros (PUIG LN; PUIG SW; PUIG IM), while the EUR bond ETF trades in euros on Deutsche Börse, SIX, and Borsa Italiana (PSFE GY; PSFE SW; PSFE IM).

The funds launched in November 2017 and attracted relatively strong demand from investors with each ETF accumulating approximately $70 million in assets under management during their first year. The funds’ assets appear to have been declining, however, with the USD and EUR funds currently housing approximately $38m and $50m respectively.

The outflows are likely a by-product of the intense competition amongst providers of low-cost, so-called ‘core’ ETFs, with investors lured towards lower-cost alternatives.  Vanguard, for example, offers two similar ETFs – the Vanguard USD Corporate Bond UCITS ETF (VUCP LN) and Vanguard EUR Corporate Bond UCITS ETF (VECP LN) – which come with expense ratios of 0.09% and collectively house $650m.

Similarly, Amundi disrupted the market with the introduction of its ultra-low-cost ETF suite – branded ‘Prime’ – in March 2019. The Amundi Prime US Corporates UCITS ETF DR (PRIP LN) and Amundi Prime Euro Corporates UCITS ETF (PRIC LN) offer expense ratios of just 0.05% and have since accumulated $70m and $270m in AUM respectively.

Invesco’s fee cuts are a probable counter-response.

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