The so-called exchange traded fund fee war has been coming to a head over the past year, quickly escalating as the investment product garners a broader following.
“The beliefs about what determines competition were formed at a time when it was more of an institutional trading product,” Luke Montgomery, analyst with Bernstein Research, said in a Financial Times report.
When the ETF product first came to market, providers were jockeying for the first mover advantage, which ultimately led to a larger and more liquid following.
Now, with more individual retail investors and buy-and-hold institutional investors taking a greater interest in ETFs, fees have become a sticking point. [The Phony ETF Fee War?]
Jim Ross, global head of ETFs at State street Global Advisors, though, also points out that investors are factoring in fees to the total cost of ownership. [Morningstar’s Scott Burns Weighs In on ETF Fee Feud]