GSAM ETF pricing could harm asset management industry: Moody's
A new smart-beta exchange-traded fund from Goldman Sachs Asset Management may permanently lower the pricing bar for similar products, damaging the industry, according to credit agency Moody's. The ETF has an expense ratio of nine basis points, substantially below the average of 24 to 39 usually charged for similar smart-beta offerings investing in factor-based indices. Offering prices below 10 basis points on more complex equity ETFs is likely bad news for traditional active managers seeking to enter the ETF space with quantitative products, according to Moody's.
A new exchange traded fund from Goldman Sachs' asset management arm is fueling a Wall Street price war that could hurt the industry, credit agency Moody's says.

The new "smart-beta" product, which tracks an equal weight index of roughly 500 large cap equities, was announced Thursday and is set to be one of the lowest priced ETFs out there. It will trade under the ticker GSEW and has an expense ratio of 0.09%.

Most smart-beta products, like GSEW, have an expense ratio between 0.24% and 0.39% while traditional mutual funds are generally more expensive, near 0.63%, according to Moody’s.

"The ETF price war beyond vanilla ETFs is credit negative for traditional active equity players entering the smart-beta realm," wrote Moody’s analyst Stephen Tu in a note Thursday morning.

"GSAM has a long history in quantitative investing on behalf of institutions in both traditional and alternative strategies and had earlier forays launching competitively priced products. With this recent move, GSAM is now solidifying a price point below 10 basis points for simple smart-beta strategies."

Here’s a breakdown of other similarly priced ETFs, from Moody’s:

Moody's

ETFs are some for the hottest investment products on the market, and outnumber individual securities in the United States. GSEW will be Goldman’s 11th ETF since it started offering the products in 2015. Today, Goldman manages $5.6 billion in ETF assets.

"GSEW seeks to help investors looking for a low cost way to avoid market cap biases, by allocating evenly to the largest U.S. companies, independent of their relative size," Michael Crinieri, GSAM’s chief ETF strategist, said in a press release.