0.07% and Falling: How Cheap Can a Global Tracker Get?
(Update: As of 28 July, Vanguard’s FTSE All-World will be reduced to a 0.14% fee. Announced the day I wrote this and somewhat answering the concluding question - “not very long at all”.
In April, Xtrackers launched a FTSE All-World ETF (ALLG) at the low ongoing fee of just 0.12%. But they quickly slashed this to 0.07% when BlackRock launched their own iShares version at exactly the same 0.12%.
So why isn’t everyone already holding it?
The obvious objections
There’s no distributing version, which rules it out instantly for anyone who needs income paid out rather than reinvested. It’s also young and comparatively small, with £59m in assets still a fraction of an established giant like VWRP.
That newness comes with a practical wrinkle too. ALLG samples a smaller number of holdings than its bigger rivals, rather than owning the full index outright. In theory, that’s a bigger drag on tracking accuracy.
Except it doesn’t seem to matter
Here’s the twist. Over the last three months, ALLG has tracked VWRP just as tightly, despite VWRP holding roughly twice as many underlying stocks. Fewer holdings, same result. If that pattern holds as the fund scales up, the “sampling” concern starts to look more theoretical than real.
A market running out of room to cut
What’s really striking is what happened once ALLG’s fee cut landed. Priced identically at launch, iShares is now stuck at nearly double the cost of the fund it was matched against, and the growth numbers show it. ALLG has gone from around £30m to £59m in AUM in just a few weeks, while iShares has stalled at £22m. It looks like the price cut is doing exactly what you’d expect and money is following the cheaper fund. At this level of maturity, a few basis points is the entire pitch.
That’s the real story here. Fully global index investing increasingly looks solved at the 0.06 to 0.07% price point. Amundi’s PACW matches ALLG’s 0.07% fee while still offering a distributing version and emerging market exposure, tracking a Solactive index built along similar lines to MSCI ACWI/FTSE All-World. If you’re happy to skip emerging markets entirely, UBS’s MSCI World funds (WRDA/WRDD) undercut everyone at 0.06%. And if you just want the US, State Street’s SPDR S&P 500 trackers go as low as 0.03%, with both distributing and accumulating versions available.
The stragglers
This makes the pricing at the other end of the market look increasingly hard to justify. Invesco’s FTSE All-World charges 0.15%, more than double ALLG. Vanguard’s version comes in even higher at 0.19%, nearly triple. These aren’t niche or specialist products; they’re the same index, the same coverage, at two to three times the cost.
The question this raises
If a single-country S&P 500 tracker can be had for 0.03%, and a full global tracker for 0.07%, what exactly are Invesco and Vanguard’s fees still paying for? Brand recognition and fund size clearly count for something, but with iShares already staggering behind a rival that just cut its price by more than 40% in response to being matched, how much longer can a 0.15 to 0.19% fee survive in this market?