Franklin Templeton go ultra-cheap with single-country ETF launch
Franklin Templeton has launched a suite of single-country exchange-traded funds, with expense ratios well below the average for such offerings. The firm's developed-market ETFs will be available for nine basis points, well below BlackRock's iShares suite, which charges upwards of 40 basis points for similar exposure. Franklin Templeton will also be offering a suite of emerging-market single-country ETFs for 19 basis points for each fund, again lower than BlackRock's comparable single-country offerings, which charge investors over 60 basis points in some instances. 

It seems no part of the ETF marketplace is safe from the downward pressure that is perpetually pushing fees lower.

The latest category of exchange-traded funds where expense ratios have seen an abrupt move down is single-country funds, which offer exposure to the equity markets of individual countries.

Franklin Templeton Investments on Monday announced a new suite of 16 ETFs that will debut on the NYSE Arca on Nov. 6. The funds will track a number of both developed and emerging markets, and do so at a significantly reduced fee compared with their most widely traded rivals.

Developed-market funds—including for such countries as Germany, Hong Kong, France, Canada, and Japan—will charge nine basis points, or 0.09% of assets, which amounts to $9 for every $10,000 invested. BlackRock’s iShares line of ETFs, which has offered similar funds for more than 20 years in some cases, charge substantially higher. The $17.39 billion iShares MSCI Japan ETF EWJ, +0.42% charges 0.48%, as do other developed-market funds.

For emerging markets like China, Brazil, and Mexico, Franklin Templeton funds will charge 0.19%. The iShares MSCI Brazil Capped ETF EWZ, +0.33% charges 0.63% while the iShares MSCI China ETF MCHI, +0.36% goes for 0.64%. The iShares MSCI Mexico Capped ETF EWW, -0.43% has an expense ratio of 0.48%.

The Franklin Templeton funds will track a FTSE index, while the iShares products track MSCI indexes.

IShares currently offers 65 single-country funds, including some currency-hedged products and funds that track subsections of specific regions—for example, the iShares China Large-Cap ETF FXI, +0.09% . The 65 funds have a total of about $72.77 billion in assets, according to an analysis of BlackRock data.

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The news is just the latest in a series of falling ETF fees. In early September, the GraniteShares Gold Trust BAR, -0.08% was launched with an expense ratio of 0.2%, half the fee charged by the SPDR Gold Shares ETF GLD, -0.11% , by far the biggest gold fund on the market. Separately, Goldman Sachs filed for a fund that tracks an equally weighted index of large-cap stocks. The ETF will only cost 0.09%, dramatically lower than the similar Guggenheim S&P 500 Equal Weight ETF RSP, +0.23% , which carries a fee of 0.2%.

Earlier this month, State Street Global Advisors cut expense ratios on more than 15 funds in a bid to court retail investors and advisers. While some of the cuts were relatively minor, with the fees dropping by just a few basis points, others represented substantial changes. The SPDR Portfolio Emerging Markets ETF SPEM, +0.20% (previously the SPDR S&P Emerging Markets ETF) had its fee cut from 0.59% to 0.11%. Another, the SPDR Portfolio World ex-US ETF SPDW, +0.12% , is being reduced to a fee of 0.04% from 0.34%, a cut of nearly 90%.

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Franklin Templeton’s suite of funds represent the firm’s first foray into passive ETFs, which attempt to mimic the performance of an underlying index by holding the same components it does, and in the same proportion. Investors have been heavily trending toward these products for years, adopting them as they drop actively managed funds, where the components are handpicked by a manager.

Few firms have felt the sting of this trend to passive as much as Franklin Templeton. According to data from Morningstar Direct, the firm has seen more than $19 billion in outflows across its funds thus far this year, the highest outflows of any fund family it tracks. Franklin had about $753 billion in assets as of September.