Vanguard has taken the ETF fee war to a whole new level by shifting to new benchmarks that charge lower index-licensing fees and passing the savings along to investors.
Vanguard’s move follows plans by rivals Charles Schwab and BlackRock to slash expense ratios on their ETFs. [Vanguard Benchmark Trade Shakes Up Index Industry]
However, the ETF fee war may be raising the barriers to entry for new firms and putting pressure on smaller companies due to thinner profit margins.
“This all makes it more difficult for new entrants to successfully compete. That has cut the net increase in ETFs in the first nine months of this year to just 60, down almost 69% from 192 in the same period last year,” Reuters reports.
There have been 147 new exchange traded products launched in the U.S. this year through the end of September with $5.8 billion of assets, according BlackRock, which oversees the iShares ETFs.
Meanwhile, 59 products were delisted through the end of the third quarter due to lack of interest and trading volume. These shuttered funds represented combined assets of less than $500 million. [The 10 Top-Selling New ETFs of 2012]