Daily ETF Watch: iShares’ Zero-Fee ETF

February 03, 2014

Is the imminent T-note floater fund’s expense ratio too good to be true?

iShares is taking a battle with WisdomTree over floating-rate Treasury ETFs to the streets. The two firms are both launching floating-rate T-note funds on Tuesday, Feb. 4, and iShares now plans for its offering in the space, the iShares Treasury Floating Rate Bond ETF (TFLO), to have an annual expense ratio of zero.

TFLO’s investment advisor, BlackRock Fund Advisors, has contractually agreed to waive its advisory fee of 0.15 percent through Feb. 28, 2015, according to a regulatory filing.

TFLO, which again will launch on Tuesday, Feb. 4, will go head-to-head against the WisdomTree Bloomberg Floating Rate Treasury Fund (USFR), which is also launching on Feb. 4. The WisdomTree ETF will have an annual expense ratio of 0.15 percent, or $15 for every $10,000 invested.

Both funds are a direct response to investor demand for investment tools with which to mitigate the effects of higher rates ahead. State Street Global Advisors also has plans to offer so-called Treasury floaters.

More Launches

iShares filed regulatory paperwork last week to launch on Feb. 4 three MSCI-indexed currency-hedged equities funds targeting Japan, EAFE countries and Germany, bringing it into direct competition with an identical lineup of existing products sponsored by Deutsche Bank.

The three planned ETFs, and links to their respective prospectuses, are as follows:

iShares’ proposed Japan-focused fund will also bring San Francisco-based iShares into competition with WisdomTree’s blockbuster $12.2 billion WisdomTree Japan Hedged Equity ETF (DXJ | B-45), which has gathered $9.74 billion in 2013, according to data compiled by ETF.com.

HEWJ and HEWG will have expense ratios of 0.53 percent, or $53 for every $10,000 invested while HEFA will charge 0.39 percent, or $39 for every $10,000 invested.

Filings:

  • Effective Jan. 31, the expense ratios of the nine Select Sector SPDRs have been reduced from 0.18 percent, or $18 for every $10,000 invested, to 0.16 percent, or $16 for every $10,000 invested. The primary driver behind the reduction is the rise in total assets under management that the funds experienced last year, according to the firm. While the new expense ratios aren’t cheapest in class relative to a competing lineup from Fidelity, there’s no doubt they’re more liquid and therefore cheaper to trade than any other sector ETFs.

The nine funds include:

  1. Consumer Discretionary Select Sector SPDR Fund (XLY | A-89)
  2. Consumer Staples Select Sector SPDR Fund (XLP | A-92)
  3. Financial Select Sector SPDR Fund (XLF | A-91)
  4. Health Care Select Sector SPDR Fund (XLV | A-93)
  5. Industrials Select Sector SPDR Fund (XLI | A-89)
  6. Materials Select Sector SPDR ETF (XLB | A-82)
  7. Technology Select Sector SPDR (XLK | A-77)
  8. Utilities Select Sector SPDR Fund (XLU | A-93)
  9. Energy Select Sector SPDR ETF (XLE | A-93)

In 2013, assets in the funds increased by $28 billion, bringing the total AUM to $79 billion, according to the firm.

  • Effective Feb. 3, the EGShares Low Volatility Emerging Markets Dividend ETF

(HILO | F-31) will start tracking the FTSE Emerging All Cap ex Taiwan Low Volatility Dividend Index.

  • Also, the EGShares Brazil Infrastructure ETF (BRXX | F-25) will start tracking the FTSE Brazil Infrastructure Extended Index, and the EGShares Emerging Markets Domestic Demand ETF (EMDD | F-41) will tracking the S&P Emerging Markets Domestic Demand Index.

Previously, all three ETFs tracked INDXX indices.

Four EGShares ETFs will continue to track INDXX indices, including the EGShares India Small Cap ETF (SCIN | F-64), the EGShares India Infrastructure ETF (INXX | F-12), the EGShares India Consumer ETF (INCO | F-41) and the EGShares China Infrastructure ETF (CHXX | D-31).

  • iShares has filed regulatory paperwork detailing 11 new ETFs focused on the Middle East, Europe and Asia covering the equities and fixed-income markets. The new proposed funds include the:
  1. iShares MSCI Qatar Capped ETF
  2. iShares MSCI UAE Capped ETF
  3. iShares MSCI USA with EM Exposure ETF
  4. iShares MSCI ACWI with EM Exposure ETF
  5. iShares MSCI World ex USA with EM Exposure ETF
  6. iShares MSCI All Country Asia ex Japan Minimum Volatility ETF
  7. iShares MSCI Europe Minimum Volatility ETF
  8. iShares MSCI Japan Minimum Volatility ETF
  9. iSharesBond 2017 Corporate Term ETF
  10. iShares MSCI Europe IMI ETF
  11. iShares MSCI Pacific IMI ETF

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