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Small investors ruled out of cheap ETF share class

Small investors ruled out of cheap ETF share class

UBS has a two-tier pricing structure on its range of exchange traded funds (ETFs) that leaves small investors unable to access the cheaper share class.

Unlike other ETF providers in Europe, who have one, flat charging structure for all investors, UBS has a lower-cost institutional share class and a more expensive retail share class.

However, industry participants believe this undermines the ethos of ETFs, in the view these products should be democratising and allow retail investors access to asset classes at institutional rates.

UBS’s MSCI Emerging Markets A ETF, for example, has a TER of 0.70%, while the same ETF costs only 0.45% under the institutional share class.

One unit – or the minimum investment – for the A share class on the 28 September, for example, was $100.24, whereas one unit for an I share class was $100,130.30.

According to UBS, the share class I is aimed at institutional investors and wealthy private clients, while the share class A is intended for private investors.

While institutional investors are offered reduced fees in share class I, UBS said private investors benefit from the particularly high liquidity of share class A in stock market trading and the competitive management fees.

As share class I is intended for institutional investors, a large portion of orders are processed over the counter (OTC).

However, critics argue the I share class is certainly not accessible to retail, who would be hard pushed to come up with a minimum of around $100,000 for one unit.

 

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