There have been 230-plus new ETFs that have come to market this year, some bringing innovation, some bringing me-too revivals, and some coming and going before anyone even took notice.
Among these launches, three new ETFs stand out for the broader stories they tell. With the help of my friend at Bloomberg Intelligence, Senior ETF Analyst Eric Balchunas, we take a closer look at how these new funds helped shape ETF investing this year.
New Gold ETFs Bring Fee War To Gold
State Street Global Advisors—the issuer behind the oldest and biggest gold ETF in the market, the SPDR Gold Trust (GLD)—launched in June another version of its behemoth success: the SPDR Gold MiniShares Trust (GLDM).
The launch showed State Street’s expanding commitment to battle it out with the likes of iShares and Vanguard for cheap core placement—GLDMs cost only a fraction of what GLD charges, and came to market with the lowest price tag in the gold segment, at 0.18% in expense ratio.
The aggressive fee move was quickly followed when, a month later, Perth Mint, through third-party provider Exchange Traded Concepts, launched the Perth Mint Physical Gold ETF (AAAU).
Like GLDM, AAAU is a physically backed gold ETF, and it too costs 0.18%. These newcomers came to disrupt the gold ETF segment by offering access to physical gold for the cheapest price around.
GLDM vaults bars in London, and AAAU vaults in Australia. Both of these new gold funds hold about 1/100th of an ounce of gold per share—or about the same amount as the competing iShares Gold Trust (IAU), and about 1/10th as much gold per share as GLD. As noted, they have identical expense ratios.
And then things got even more interesting. These cheapest-in-class ETFs undercut the price tag for the GraniteShares Gold Trust (BAR) by just a smidge—BAR, which launched in 2017, came to market with a fee of 0.20%.
That leadership, however, didn’t last long. As GLDM and AAAU gathered assets—they have already amassed $306 million and $65 million in total assets, respectively—GraniteShares slashed BAR’s expense ratio to take on its new competitors. Since October, BAR costs 0.1749%—exactly 51/100th of a basis point cheaper than GLDM and AAAU.
“Not only is the fee war breaking out in gold, it’s taken it to another level—splitting a basis point,” Balchunas said. “That’s not going to have a huge effect on anyone’s life, but symbolically, it shows just how intense the fee war is getting.”
Ultrashort-Term Bond ETFs All The Rage
Without a doubt, 2018 has been the year of the short- and ultrashort-term bond ETF.
As interest rates rose, the yield curve flattened, and investors searched for safety in quality assets without too much rate risk, ultrashort-duration bond ETFs emerged as the play du jour.
Assets flowed in—funds like the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) have gathered more than $5 billion this year; the JPMorgan Ultra-Short Income ETF (JPST) has taken in more than $3.2 billion year-to-date, among others. And issuers followed that investor demand with the launch of eight ETFs in this segment, six of which are actively managed.
The most successful of these launches was Prudential’s PGIM Ultra Short Bond ETF (PULS), which gathered $111 million in total assets since April.
PULS is actively managed and is the cheapest among competing active funds, at 0.15% in expense ratio, or $15 per $10,000 invested. That’s significant for a newcomer looking to compete in a universe of 16 ultrashort and 68 short-term bond funds. It’s a quickly crowding space.
Other newcomers this year include: