iShares, typically the costliest European provider when it comes to exchange-traded fund management fees, has launched a price war in an area of the European tracker market from which it has up to now been absent – exchange-traded commodities tracking precious metals.
This morning iShares launched exchange-traded commodities tracking gold, silver, palladium and platinum on the London Stock Exchange. All the ETCs are backed by metal held in custody at JP Morgan Chase Bank N.A. The iShares gold ETC has an annual expense ratio of 0.25%, while the ETCs tracking the other three metals all carry expense ratios of 0.4%.
By contrast, ETF Securities, the ETP market’s largest issuer of commodity trackers, charges 0.39% and 0.4%, respectively, for its ETFS Physical Gold and ETFS Gold Bullion Securities ETCs, and 0.49% a year for its physically backed ETCs tracking silver, palladium and platinum.
Deutsche Bank, which launched an exchange-traded commodities platform early in 2010, charges 0.29% a year for its gold tracker and 0.45% a year for its palladium, platinum and silver ETCs.
In Switzerland, the venue of listing for Europe’s largest bullion ETPs, market leaders ZKB and Julius Baer both charge 0.4% per annum for their gold ETFs, while Credit Suisse charges 0.33% a year.
iShares’ price-cutting move mirrors a similar strategy undertaken by the firm in the US exchange-traded fund market. In July last year, iShares’ US-listed gold trust (NYSE Arca:IAU) cut its fees from 0.4% a year to 0.25%, undercutting the larger competing fund offered by State Street (and the largest gold ETP in the world), SPDR Gold (NYSE Arca:GLD). Since the price cut, iShares’ IAU has, unsurprisingly, gained market share at the expense of other US-based gold trackers.
However, iShares is entering the European bullion tracker market at a time when some analysts are warning of a price bubble. Gold last week hit a new all-time price high in nominal terms, while the price of silver has more than doubled in a year.
According to Joe Linhares, head of iShares’ European operation, it’s simply a matter of offering the firm’s investor clients what they need. “Commodity-related exchange-traded products are generating significant interest from investors and as a fiduciary manager we take the responsibility of our investors’ interests very seriously,” said Linhares. “iShares’ physically backed ETC range has been designed to provide exposure to precious metals in a way that meets our core values of transparency, liquidity, trading flexibility and investor protection. ”