Bestinvest recommends Vanguard S&P 500 ETF after review

Bestinvest has given the Vanguard S&P 500 exchange-traded fund (ETF) a three star buy rating and has recommended it to customers as a replacement for the iShares S&P 500 ETF.

The discount broker suspended its rating on the iShares ETF on Monday after the firm only cut its 0.4 per cent charge on just one of the fund’s two share classes.

Ben Seager-Scott, senior research analyst at Bestinvest, said he had awarded the Vanguard ETF its rating following an extensive review of the pricing of the available US equity ETFs.

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He said: “For internal and external costs, we found the Vanguard ETF to be very attractive compared to other available funds, with a low on-going cost (net of withholding tax) of just 9 basis points and a bid-offer spread of just 10 basis points.

“We have every reason to expect this spread will continue to tighten as this fund continues to attract fresh interest.

“As a result, we believe this fund is now considerably better placed than rivals who have previously relied on this liquidity gap to charge a premium.”

A spokesperson for iShares said: “Our aim is to offer investors a wide range of tools to implement their specific needs.

“By reducing the fees on the accumulating versions of the FTSE 100 and S&P 500 we are giving longer term investors low cost access to key exposures with the service and quality they’ve come to expect from iShares.

“The distribution versions of these exposures remain the funds of choice for investors who place a premium on greater liquidity.”