Last month, State Street Global Advisors joined the brawl, launching the SPDR Russell 2000 ETF (NYSEArca: TWOK) to compete with other existing Russell small-cap ETFs. Fund providers know that if they launch ETFs with strategies similar to existing products, they have to come out with lower fees to gain a competitive advantage. Additionally, SSgA came out and lowered expense ratios on three of its Russell index funds. [ETF Index Changes Show Methodology Matters]
Currently, two Charles Schwab ETFs linked to broad U.S. equities have the cheapest expense ratios at 0.04%.
While the fee war may have only reduced expenses a couple of basis points, the lower fees add up over time as compounding helps investors save thousands over time.
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Max Chen contributed to this article.