BlackRock Inc. (BLK), the world’s largest asset manager, attracted the most deposits into exchange-traded products last year even as it continued to lose market share in the U.S. to Vanguard Group Inc.
BlackRock’s iShares unit, which manages $759 billion in ETPs and offers about 600 funds, pulled in $85.3 billion of a record $262.7 billion in worldwide deposits, the most of any provider, including a market-leading $61 billion in the U.S., according to a report today from New York-based BlackRock. Vanguard drew $54.2 billion globally to rank second, according to BlackRock.
BlackRock’s Chief Executive Officer Laurence D. Fink said last year the firm would address iShares’ strategy after the firm lost market share in the U.S. to Vanguard, which has boosted assets in exchange-traded funds with lower-cost products. BlackRock in October created the iShares Core Series, which is made up of 10 ETFs, six offering reduced fees and four new ones, to attract retail and institutional clients planning to invest over the long-term.
“The recent fee cuts/marketing campaign suggest BlackRock still has room for growth in the ETF market,” Marc Irizarry, an analyst at Goldman Sachs Group Inc., wrote in a research note published today.
Global deposits into ETPs surpassed the previous high of $259.7 billion in 2008, as fixed-income funds drew an unprecedented $70 billion and emerging-market stock products took in a record $54.8 billion, BlackRock said in the report. Assets in ETPs were $1.9 trillion as of the end of last year, a 27 percent increase from 2011.
“Fixed income was a key driver of flows globally, as investors of all kinds increasingly adopt ETFs as an essential instrument for accessing the bond markets,” Mark Wiedman, global head of iShares, said in a statement. “IShares captured $28.8 billion globally or 41 percent of all new flows into fixed income ETFs.”
BlackRock, which still has the biggest slice of the ETF business, saw its U.S. ETF market share fall 1.3 percentage points in 2012 through November to 41.4 percent, compared with an increase of 2.3 percentage points for Vanguard to 18.5 percent, according to a report by State Street Global Advisors. State Street has the second-highest U.S. market share, with 23.6 percent, followed by Vanguard, the report said.
State Street’s SPDR S&P 500 ETF Trust attracted the most deposits of any ETF in 2012 with $15.8 billion and Vanguard MSCI Emerging Markets ETF was No. 2 with $10.6 billion, according to the BlackRock report. IShares MSCI Emerging Markets Index Fund was third with $10.5 billion.
Vanguard said in October it was going to drop MSCI Inc. (MSCI) as the benchmark provider for 22 index funds to lower costs for shareholders over time. Vanguard, based in Valley Forge, Pennsylvania, last month lowered fees for 24 of its ETFs, including the $4.76 billion Vanguard Short-Term Corporate Bond ETF to 0.12 percent from 0.14 percent.
ETPs include those structured as funds, as well as exchange-traded notes. ETFs grant shareholders a claim on assets held by the fund, while ETNs represent an unsecured debt obligation by the issuer to the holder. ETPs, unlike mutual funds, trade throughout the day on an exchange, like stocks. They typically hold a basket of securities or physical commodities that tracks an index.
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