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The Top Factors to Consider When Selecting an ETF

Total expense ratio (TER) is the most critical factor to consider when selecting an ETF, according to a survey presented by the EDHEC-Risk Institute

Hortense Bioy, CFA 25.04.2013

The Total Expense Ratio (TER) has increased in importance when selecting an ETF, according to a survey presented by the EDHEC-Risk Institute at its annual European conference recently. While the survey was conducted amongst European investors, we believe these considerations would be broadly applicable to Asian investors.

Total Expense Ratio
For more than two thirds of survey respondents (68% in 2012, compared to 61% in 2011), TER was the most critical selection criteria. This result shows that investors are scrutinising ETF costs more closely, even though they are already a comparatively low cost vehicle.

This result also supports recent decisions by some ETF providers to cut fees. While intensifying price competition is today more evident in the US, the entrance of low cost providers like Vanguard in Europe is starting to put pressure on well-established players.

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About Author

Hortense Bioy, CFA

Hortense Bioy, CFA  Hortense Bioy, CFA, is Director of passive fund research for Morningstar Europe.

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