ETF Price War Heats Up as BlackRock Cuts Fees on Seven Funds

  • Fees as low as 0.03% as BlackRock targets buy-and-hold clients
  • BlackRock introduces global investment grade bond core ETF

BlackRock Inc., the largest provider of exchange-traded funds, cut fees on seven U.S.-listed ETFs aimed at price-conscious investors, as competition for market share heats up.

The fee cuts bring the expense ratio for the iShares Core S&P Total U.S. Stock Market ETF to 0.03 percent from 0.07 percent, effective today, according to a statement Tuesday by the New York-based money manager. That’s less than the 0.05 percent charged by the $57 billion Vanguard Total Stock Market ETF.

“This is part of our continued drive to have really competitive funds in this space," said Ruth Weiss, head of the U.S. iShares product team.

BlackRock, which in 2012 started its “core" series of U.S. funds to attract buy-and-hold investors into the products, is stepping up fee cuts as ETF providers compete in an increasingly crowded market. Its fiercest competitor has been Vanguard Group, whose broad-market ETFs appeal to individual investors for their low cost. BlackRock’s move follows a similar round last year, when the firm cut fees on its core lineup and rolled out more low-cost funds.

BlackRock’s core lineup has attracted more than $62.8 billion in new money since 2012. Vanguard, a latecomer in ETFs, has gained ground on on rivals such as BlackRock and State Street Corp., whose offerings are popular with institutional investors. Vanguard, now the second biggest provider of ETFs, has attracted money from retail investors looking for low-cost funds.

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“Vanguard is an across-the-board low-cost leader, not just on a small number of select products,” John Woerth, a spokesman for the firm, said in an e-mailed statement. “Given our at-cost structure and strong cash inflows, Vanguard expects to continue to pass along economies of scale savings to our clients in the form of lower expense ratios.”

Expense ratios for the six other core ETFs affected by the cuts are now between 0.16 percent for the iShares Core MSCI Emerging Markets ETF and 0.07 percent for the iShares Core U.S. Growth and Core U.S. Value ETFs. The expense ratio of the iShares Core Total USD Bond Market ETF is falling to 0.12 percent from 0.15 percent.

BlackRock also introduced the iShares Core International Aggregate Bond ETF, which tracks an index of international investment grade bonds while hedging foreign currency risk. The firm pulled iShares Core GNMA Bond ETF from the core series, changing its name to the iShares GNMA Bond ETF.

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