European ETF provider Lyxor has cut the fees charged on ten of its global sector ETFs. The total expense ratios of the funds are now 0.30%, a reduction of ten basis points from their previous cost of 0.40%. The changes came into effect on 1 June 2017.

Both Lyxor and SPDR ETFs offer a comprehensive suite of global sector ETFs, each priced with total expense ratios of 0.30%.

The ETFs track indices provided by MSCI and offer exposure to globally listed companies operating within chosen sectors. By lowering the funds’ fees, Lyxor has brought the suite in line with the cost of SPDR ETFs’ global sector ETFs which track the same MSCI indices. The move highlights how competition in the ETF provider space is putting downward pressure on fees and benefiting the investor.

Sector ETFs provide a means for investors to adjust their exposures simply and cost-efficiently in response to changes in the economic cycle. Such ETFs are popular building blocks within a sector-rotation strategy where managers attempt to outperform the broad market through careful timing of various sector plays.

In the early phase of the business cycle, the broad stock market tends to do well as expectations for future economic activity turn increasingly upbeat. On a relative basis, cyclicals and interest-rate-sensitive sectors such as consumer discretionary and financials tend to outperform. Furthermore, economically sensitive sectors such as technology and industrials receive boosts from increased activity.

During the mid-cycle phase, economically sensitive sectors may continue to outperform with industries that receive greater product demand once the recovery has been established doing particularly well. Most stock market corrections have historically occurred during this phase, however, leading to less reliability of historic analysis as a determinant of sector outperformers. Investors may wish to avoid sectors such as utilities, though, as defensive sectors have traditionally been laggards.

As the economic recovery reaches its later stages, inflationary pressures push up the costs of raw materials which tends to directly lead to the relatively strong performance of companies in the energy and materials sectors. Defensive sectors may also provide market-beating returns.

During the actual recession, defensive sectors continue to outperform with consumer staples historically providing the most reliable record of outperformance. In the same vein, utilities and health care may also provide good returns.

According to MSCI, utilities was the best performing sector globally during May. (See: ‘Utilities tops MSCI’s sector indices during May‘)

Lyxor’s range of global sector ETFs include the:
Lyxor MSCI World Consumer Discretionary UCITS ETF (LON: DISW)
Lyxor MSCI World Consumer Staples UCITS ETF (LON: STAW)
Lyxor MSCI World Energy UCITS ETF (LON: NRGW)
Lyxor MSCI World Financials UCITS ETF (LON: FINW)
Lyxor MSCI World Health Care UCITS ETF (LON: HLTG)
Lyxor MSCI World Industrials UCITS ETF (LON: INDW)
Lyxor MSCI World Information Technology UCITS ETF (LON: TNOW)
Lyxor MSCI World Materials UCITS ETF (LON: MATW)
Lyxor MSCI World Telecommunication Services UCITS ETF (LON: TELW)
Lyxor MSCI World Utilities UCITS ETF (LON: UTIW)