Fee War Erupts in Single-Stock ETF Market with Leverage Shares' Launch

Leverage Shares has launched two single-stock ETFs, NVDG and TSLG, with a 0.75% fee, the lowest among more than 90 such funds. This marks the start of a fee war in the single-stock ETF market, where most funds charge more than 1%. The new funds face competition from established players, and it remains to be seen if investors will switch to the cheaper options.

In a move that is set to intensify the competition in the US single-stock exchange-traded fund (ETF) market, Leverage Shares, a pioneering player in European leveraged and single-stock ETPs, has launched two new funds, NVDG and TSLG, with a fee of 0.75% [1]. This is the lowest among the over 90 such funds currently available, marking the beginning of a fee war in this sector where most funds charge over 1% [1].

Leverage Shares, which had $168mn across its European single-stock ETPs as of May 31, 2021 [1], is no stranger to the world of ETFs. The firm launched its first ETP on the London Stock Exchange in 2017 [1]. With the US launch of NVDG and TSLG, Leverage Shares will offer the first US single-stock ETFs tracking Arm Holdings, ASML Holding, and Taiwan Semiconductor Manufacturing Company [1].

The new funds, which will double the daily returns of Nvidia and Tesla, respectively, face stiff competition from established players such as Direxion, GraniteShares, and YieldMax [1]. These issuers control a significant portion of the $7.4bn single-stock US ETF space, with over $5.3bn invested in Nvidia and Tesla-tracking ETFs as of April 30, 2022 [1].

While fees might not be the primary deciding factor for investors in single-stock ETFs, given their short-term nature and day trading focus [1], Leverage Shares could still attract investors by undercutting its competitors on fees. This strategy has been successful for the firm in Europe, where it has garnered significant assets under management and experienced net inflows of $58mn during the year ended May 31, 2021 [1].

However, Leverage Shares remains tight-lipped about the fees for its new US offerings, and the company did not respond to requests for comment [1]. With the single-stock ETF market becoming increasingly competitive, it will be interesting to see how Leverage Shares positions itself and whether investors will switch to the cheaper options.

References:
[1] https://www.ft.com/content/45d5c4d1-0966-4849-9879-c81810e943a2