“A very aggressive pricing environment (particularly among Vanguard, iShares, and Schwab) for basic, broad, market-cap-weighted funds has also helped,” Oey said.
For example, last year, BlackRock’s iShares reduced the fees on a number of its products, with the Shares Core S&P Total US Stock Market ETF (NYSEArca: ITOT) showing an expense ratio of 0.03%. ITOT was the cheapest on the block for a brief moment. [The New Cheapest ETF In The U.S. Is A Familiar Face]
Not to be outdone, Charles Schwab lowered fees by one basis point on four of its large-cap ETFs in response, with the Schwab U.S. Large-Cap ETF (NYSEArca: SCHX) and Schwab U.S. Broad Market ETF (NYSEArca: SCHB) both coming in at a low 0.03% expense ratio. [Schwab Responds to iShares Fee Cuts]
Moreover, new entrants into the ETF space have also came out with cheaper offerings to help give their offerings a leg up against more established ETFs. For instance, Fidelity launched a group of cheap sector ETFs to compete with the stalwart SPDR sector suite. Goldman Sachs launched a group of smart-beta ETFs that cost as much as large index-based ETFs.