FocusShares ETFs To Compete On Price

February 28, 2011

FocusShares serves notice that a third low-cost ETF provider is about to arrive.

 

FocusShares, the Montvale, N.J.-based exchange-traded fund firm that’s on the verge of rolling out a broad new lineup of 15 U.S. equity funds, has priced some of its funds to undercut competing products from the ETF industry’s leading low-cost providers, Vanguard and Schwab, according to a regulatory filing.

FocusShares’ Morningstar US Market Index ETF (NYSEArca: FMU) will undercut the Schwab U.S. Broad Equity ETF (NYSEArca: SCHB) by 0.01 percentage point, which will make it the cheapest ETF in its segment once it launches. Also, its Morningstar Large Cap Index ETF (NYSEArca: FLG) undercuts Vanguard’s S&P 500 ETF (NYSEArca: VOO), also making it the cheapest ETF in its segment.

FocusShares parent, Scottrade, said in December that the ETF company was likely to roll out the new funds early in 2011, and today’s filing makes it look like the rollout is coming soon. The company revealed tickers in a filing in early February. The revelation of tickers and prices of ETFs often suggests that the rollout of a particular fund or group of funds is near, if not imminent.

The arrival of another low-cost ETF provider is likely to keep downward pressure on ETF expense ratios in general. Moreover, industry sources say Scottrade will offer its customers free trading on the new FocusShares ETFs, though a Scottrade official declined to comment on that in a telephone interview with IndexUniverse.com in December. Both Schwab and Vanguard offer commission-free ETF trading to clients buying and selling their respective proprietary ETFs.

The low-cost strategy appears to be working for both Vanguard and Schwab. Vanguard, which led all other ETF firms last year in asset gathering, is now the No. 3 U.S. ETF firm, with $156.69 billion in assets as of Feb. 25. Schwab, a relative newcomer to the ETF industry, began its product rollout in November 2009, and its growing lineup has raked in almost $3.46 billion since then, according to data compiled by IndexUniverse.com.

FocusShares’ 15 planned funds use Morningstar indexes and cover just about every investment sector and style in the U.S. equities universe.

Competing On Price

The tickers and prices of FocusShares funds in competition with funds from Schwab and Vanguard are:

  • Focus Morningstar US Market Index ETF: (NYSEArca: FMU), 0.05 percent. That’s cheaper than both the 0.06 percent cost of Schwab’s “SCHB” and the 0.07 percent cost of the Vanguard Total Stock Market ETF (NYSEArca: VTI).
  • Focus Morningstar Large Cap Index ETF: (NYSEArca: FLG): 0.05 percent. That’s less expensive than VOO’s 0.06 percent expense ratio and the 0.08 percent cost of the Schwab U.S. Large Cap ETF (NYSEArca: SCHX)

 

 

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