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 18 April, 2013 | 3:05PM

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 on March 26.

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  is director of passive funds and sustainability research in Europe for Morningstar

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