|
 BlackRock Inc, the largest manager of ETFs through its iShares
brand, said it is cutting fees on seven of its over 700
exchange-traded funds.
One such fund - iShares Core S&P Total U.S. Stock Market ETF - is
being cut from 0.07 percent of assets to 0.03 percent. That sent the
sticker price of that $2.8 billion fund below that of larger funds,
such as the Vanguard Total Stock Market ETF, at 0.05 percent, and
the Schwab U.S. Large-Cap ETF, at 0.04.
Charles Schwab Corp struck back later Tuesday, saying it would lower
the expense ratio on that fund to 0.03 percent, according to
spokesman Greg Gable. The timing of that price cut was not
immediately clear. Gable said the firm would also "look at" a rate
cut on its 0.04 percent U.S. Broad Market ETF.
While those fees may seem small, they equate to millions in revenue
for asset managers and in potentially increased performance for
investors.
Three U.S. brands - BlackRock, Vanguard and State Street Corp -
control 88 percent of the ETF market's assets. They continue to trim
prices, as has Schwab. Both Schwab and Vanguard have expanded their
shares of the ETF market dramatically over the past several years.
Overall, the expenses attached to ETFs have dropped for each of the
last three years, to 0.51 percent for the average stock ETF in 2014,
according to Lipper.
"At the end of the day, this kind of fee competition benefits
investors," said Michael Rawson, an analyst at Morningstar Inc.
"It's good to see."
BlackRock's reduction could cut an estimated $1 million of
management fees BlackRock collects on the product each year, a 57
percent reduction. But cost reductions can drive a wave of new
assets into those funds, raising the fees they collect.
"Our goal is to be present in the core of investors' portfolios,"
said Ruth Weiss, head of the U.S. iShares product team, in an
interview. "We know that price is an important factor in the
decision."
[to top of second column] |
New York-based BlackRock is also replacing the Core S&P Total U.S.
Stock Market ETF's underlying index with one that includes more
small companies. Expenses on six other so-called core iShares ETFs
will be cut. The funds are aimed at buy-and-hold retail investors.
The Schwab price cut was first reported by the Wall Street Journal.
Vanguard spokesman David Hoffman said that company's ETF lineup has
average expense ratios of 0.13 percent. Vanguard delivers its ETF
products at cost, so the expense ratios cover costs of running the
funds but do not include profits, the spokesman said.
"Being an all-the-time, across-the-board cost leader is in our DNA,"
he said in an email. "Other investment firms may lower costs on a
small sub-set of funds or have a separate brand of low-cost products
as a business strategy to attract assets."
(Reporting by Trevor Hunnicutt; Editing by Christian Plumb and Lisa
Shumaker)
[© 2015 Thomson Reuters. All rights
reserved.] Copyright 2015 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
