Lyxor has launched a new range of ‘Core’ ETFs with total expense ratios starting from just 4 basis points (or 0.04%) – the lowest cost funds in Europe.
Arnaud Llinas, head of ETFs and indexing at Lyxor.
The range is composed of 16 ETFs covering the major equity markets (world, UK, Europe, US and Japan) as well as gilts and TIPS on the fixed income side.
Four new ETFs have been launched to complement 12 existing, re-badged ETFs whose fees have been cut.
The range does not include any corporate or European government bond exposures – staple holdings for some portfolios.
Of the four new funds, two are referenced to indices from Morningstar, while two track MSCI indices. The Morningstar-linked funds – the ETFs priced at 4bps – become the cheapest US and European equity ETFs available in Europe.
Lyxor claims that the fees on the range are on average 40% lower than competitor products, with 15 of the ETFs cheaper than any of their rivals’ equivalents. Only in the US can investors find cheaper ETFs.
The range is physically replicated and available on the major exchanges in Europe. The four new funds are initially listing on Deutsche Börse and London Stock Exchange.
[pullquote]“Investors tell us they want simple, high quality ETFs at low costs. We’ve launched our Core range to achieve precisely that.”
– Arnaud Llinas, head of ETFs and indexing, Lyxor.
[/pullquote]The funds do not participate in securities lending.
Commenting on the launch, Arnaud Llinas, head of ETFs and indexing at Lyxor, said: “Investors tell us they want simple, high quality ETFs at low costs. We’ve launched our Core range to achieve precisely that – cornerstone investments for any portfolio. Lyxor’s mission is to provide quality, innovative investments – our core range is a perfect complement.”
The range has been welcomed by investment professionals.
James McManus, investment manager at digital wealth manager Nutmeg, said, “This type of product innovation is exactly what the ETF industry needs: offering investors a lower cost option without compromising on quality. Lowering costs means investors keep more of their returns and Lyxor are leading the way.”
Irene Bauer, chief investment officer at investment adviser Twenty20 Investments, added, “We very much welcome this initiative from Lyxor being the new disruptor. As a manager we love lower fees. Increasingly more providers are reducing the fees on their ‘Core’ range as this garners more headlines, but at 4bps this goes even a step further.
“Lyxor previously made their mark with low fee fixed income ETFs, so they clearly mean business. Expect more competitors to follow, both with core products and hopefully also with smart beta ETFs.”
Lyxor has been aided in its efforts to lower fees by increased competition in the indexing space, perhaps most notably from Morningstar with its ‘Open Indexes’ initiative.
Colin Rogers, UK redistribution sales executive at Morningstar, commented: “Morningstar is delighted to be partnering with Lyxor in their efforts to help lower costs for investors.
“Since late 2016 Morningstar’s Open Index Project has been making equity beta index returns and constituent data available free of charge to all investors for benchmarking purposes. This same data is also available for licensing within passive products at rates which facilitate the creation of ultra low-cost products. The Lyxor low-cost ‘Core’ range of ETFs is a classic example of this strategy.”
The range will undoubtedly appeal to investors deploying new money or building new positions, but as fees reach single-digit-basis-point levels the benefits of switching from one low-cost product to a slightly cheaper one increasingly diminish, and can be outweighed by the transaction costs in transitioning assets. It will therefore be interesting to see how the range – and the new products in particular – fare.
This may not be the end of the ETF price war in Europe – there are still plenty of richly priced funds ripe for trimming – but it could be the beginning of the end.
Lyxor ‘Core’ range:
Lyxor Core Morningstar UK NT (DR) UCITS ETF (0.04%)*
Lyxor Core Morningstar US Equity (DR) UCITS ETF (0.04%)*
Lyxor Core MSCI Japan (DR) UCITS ETF (0.12%)*
Lyxor Core MSCI World (DR) UCITS ETF (0.12%)*
Lyxor Core Euro Stoxx 50 (DR) UCITS ETF (0.07%)
Lyxor Core Euro Stoxx 300 (DR) UCITS ETF (0.07%)
Lyxor Core MSCI EMU (DR) UCITS ETF (0.12%)
Lyxor Core Stoxx Europe 600 (DR) UCITS ETF (0.07%)
Lyxor Core FTSE Actuaries UK Gilts (DR) UCITS ETF (0.07%)
Lyxor Core FTSE Actuaries UK Gilts 0-5yr (DR) UCITS ETF (0.07%)
Lyxor Core FTSE Actuaries UK Gilts Inflation-Linked (DR) UCITS ETF (0.07%)
Lyxor Core US TIPS (DR) UCITS ETF (0.09%)
Lyxor Core iBoxx $ Treasuries 1-3Y (DR) UCITS ETF (0.07%)
Lyxor Core iBoxx $ Treasuries 3-5Y (DR) UCITS ETF (0.07%)
Lyxor Core iBoxx $ Treasuries 5-7Y (DR) UCITS ETF (0.07%)
Lyxor Core iBoxx $ Treasuries 7-10Y (DR) UCITS ETF (0.07%)
(*New fund. TERs in brackets.)