First Trust To Cut BICK’s Fees

September 21, 2010

In a competitive gesture to VWO, First Trust plans to cut the cost of its emerging markets ETF ‘BICK.’

First Trust, the Wheaton, Ill.-based firm known mostly for its natural gas equities ETF, will lower the annual expense ratio on its BICK Index Fund (NYSEArca: BICK) 8.5 percent to help give the relatively new fund a competitive edge in the emerging markets space.

First Trust will cut the fee by 6 basis points to 0.64 percent on Oct. 1. It’s not clear the strategy will work. First Trust’s other emerging markets fund, the First Trust ISE Chindia Index Fund (NYSEArca: FNI), has also struggled to attract assets. FNI, which charges 0.60 percent, has gathered $140 million since its May 2007 launch.

While the developed world struggles to foster a sustained recovery from its worst downturn in decades, the International Monetary Fund estimates GDP growth in emerging economies this year will be nearly five times that of developed countries, underscoring expectations that the developing countries may end up leading the global recovery.

BICK has gathered less than $25 million in six months of trade. The fund is a variation on the so-called BRIC countries that are the cornerstone of emerging market investing—Brazil, Russia, India and
China. First Trust swapped Russia for
when it designed BICK.

Low-Cost Strategy In Perspective

The decision to cut BICK’s expense ratio amounts to First Trust borrowing a page from Vanguard and Charles Schwab, the two money management firms that have made low costs central to their strategies.

However, while BICK is a one-of-a-kind ETF in terms of country exposure, its lowered annual fees are still a far cry from Schwab or Vanguard.

The Vanguard’s Emerging Markets Fund (NYSEArca: VWO) has an annual expense ratio of 0.27 percent, while the Schwab Emerging Markets Equity ETF (NYSEArca: SCHE) charges 0.25 percent.

First Trust’s gas ETF—ISE-Revere Natural Gas Index Fund (NYSEArca: FCG)—has gathered almost $340 million in assets since its rollout in May 2007.

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