State Street (NYSE:STT) Global Advisors (SSGA) has announced a significant reduction in fees for two of its European exchange-traded funds (ETFs), signaling a potential shift towards lower total expense ratios in the ETF industry. The fee cuts apply to the $5.5 billion SPDR S&P 500 (NYSE:SPY) Ucits ETF and the $821 million SPDR S&P 500 ESG Leaders Ucits ETF, which now carry a mere 3 basis points, making them the most affordable physically replicating European ETFs tracking the US blue-chip index.
State Street said that these reductions aim to enhance the accessibility and affordability of their institutional-grade investment solutions. This move comes despite a fragmented European distribution landscape and previous pricing initiatives such as DWS's Xtrackers' zero-fee move in 2009.
In addition to these changes, SSGA will also reduce fees for the euro-hedged share class of the SPDR S&P 500 Ucits ETF from 0.12% to 0.05%. They underscored the growing investor awareness about additional income from securities lending, and affirmed their commitment to providing these solutions at competitive prices, referring to them as low-cost building blocks in core equity spaces.
This aggressive fee reduction by SSGA stands in contrast to larger European ETFs such as the $18.5 billion Invesco S&P 500 Ucits ETF, $61.9 billion iShares Core S&P 500 Ucits ETF, Vanguard’s $38.6 billion S&P 500 Ucits ETF, and Amundi’s $8.2 billion Lyxor S&P 500 ETF which have higher total expense ratios between 0.05% and 0.07%. Even SSGA's own $290 billion SPDR S&P 500 ETF Trust (ASX:SPY) in the US charges more at 0.0945%.
Industry analysts from Refinitiv Lipper suggest that SSGA's fee reductions could ignite a trend of total expense ratio reductions in the ETF industry, potentially altering the competitive landscape.
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