Bitcoin ETF fee war spreads to Europe

Invesco and WisdomTree have slashed fees by more than 60 per cent on European bitcoin products as an “unprecedented” number of new exchange traded funds have become available to US investors.

The US Securities and Exchange Commission approved spot bitcoin ETFs this month from the likes of BlackRock, Fidelity and Invesco.

This has led to an “unprecedented supply of new products” for US investors, said Gary Buxton, Invesco head of ETFs for Europe, the Middle East and Africa, and Asia Pacific.

Previously such investors would have had to look to Canadian or European providers for exchange traded exposure to the cryptocurrency, experts said.

This article was previously published by Ignites Europe, a title owned by the FT Group.

“Multiple” providers have lowered fees as the US market “worked to find the new equilibrium between supply and demand” and the resulting range of prices is “considerably lower” than existing tracking products in Europe, Buxton said.

Ark Investment Management had indicated it would price its US ETF at 0.8 per cent but instead launched with no fees for the first six months or until assets reach $1bn (€920m). After that it will charge 0.21 per cent.

BlackRock investors will pay 0.25 per cent for its product, although early investors can access it at 0.12 per cent for the first year until assets reach $5bn.

The US “price wars” have settled at a level around 30 basis points, said HanETF chief executive Hector McNeil.

Below 30 bps, providers “can’t make money” unless they attract “billions” of assets under management, McNeil said. He suspected “most” would not and would therefore close in the “medium term”.

WisdomTree and Invesco have reacted by cutting fees by over 60 per cent on European-listed bitcoin exchange traded products.

Fees on the $325mn WisdomTree Physical Bitcoin ETP will fall from 0.95 per cent to 0.35 per cent, while fees on the $137mn Invesco Physical Bitcoin ETP will drop from 0.99 per cent to 0.39 per cent.

Both changes were announced within days of each other and will come into effect before the end of the month.

Invesco’s US product will waive its fees for six months or when it reaches $5bn, at which point it will charge 0.39 per cent — the same as the newly announced price on its European product.

WisdomTree Europe head Alexis Marinof said the launch of spot bitcoin ETFs in the US had “captured a lot of attention in Europe”.

Many investors “aren’t aware” that they have been able to access the same exposure through physically backed ETPs since 2019, Marinof said.

“The launch of spot bitcoin ETFs in the US is helping the crypto market to evolve as the asset class continues to stake a claim for a place in client portfolios,” he added.

In Europe virtually all digital assets exchange traded products are structured as exchange traded notes, rather than funds. Investors in ETNs own a debt security, while ETF shareholders owns a portion of a fund’s underlying assets.

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US-based ETF specialist VanEck has said it plans to be “more aggressive” in marketing its crypto products in Europe following the SEC decision.

Martijn Rozemuller, chief executive of VanEck’s European business, said that as well as boosting investor interest in cryptocurrency, the SEC’s decision had “probably helped” VanEck’s brand in Europe due to the media coverage of its bitcoin ETF.

US-listed products may be more liquid and therefore attract European investors, said 7IM senior investment manager Peter Sleep. This is because it is a bigger market and is not spread across multiple exchanges like in Europe, he says.

Spreads, tax and custody arrangements are also important considerations, said McNeil.

*Ignites Europe is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at igniteseurope.com.