BlackRock cut fees to offer cheapest ETF ever
BlackRock has cut fees on seven of its iShares ETFs. The management fees for its iShares Core S&P Total US Stock Market ETF has been cut to 3bp making it the cheapest ETF on the market, excluding those with temporary fee waivers. The move comes after Goldman Sachs entered the space in September, under cutting peers and triggering another round of price cuts from competitors including sector giant Vanguard. As reporting in our briefings, BlackRock slashed prices on its iShares just four months ago. 

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BlackRock, the asset manager behind the iShares range of exchange-traded funds, has announced key changes to its US-listed Core ETFs, a suite of diversified, low cost funds designed for investors seeking a buy-and-hold strategy. The move sees management fees reduced across seven of the range’s ETFs, the launch of the iShares Core International Aggregate Bond ETF (IAGG), as well as a broadening of the benchmark for the iShares Core S&P Total US Stock Market ETF (ITOT), helping to better align investors’ exposure with the true dynamic of the full US equity market.

Ruth Weiss, Head of US iShares product team at BlackRock commented: “We launched iShares Core in October 2012 as a branded suite of ETFs for buy-and-hold investors looking for a simple, low cost way to invest over the long-term in stocks and bonds. With today’s changes we are providing investors with broader and more diversified exposures at competitive prices.”

iShares has lowered the management expenses on seven key funds within the Core series, including ETFs covering the equity exposures in Europe, emerging markets, the Pacific, and the US. Smart beta ETFs isolating a growth factor or a value factor, as well as an ETF covering US dollar-denominated fixed income have also had their fees reduced. The most common size of the reduction was two basis points, with the lowest costing fund now charging only three basis points.

As part of the recent changes, iShares has also launched a new international bond ETF to complement the existing core suite. The iShares Core International Aggregate Bond ETF (IAGG) will replace the iShares Core GNMA Bond ETF (GNMA), and offers investors exposure to a diversified range of international investment-grade bonds while hedging for currency risk exposures.

Finally, effective as of 18 December 2015, the iShares Core S&P Total US Stock Market ETF (ITOT) will switch from the S&P Composite 1500 Index to begin tracking the S&P Total Market Index.

“The new S&P benchmark for ITOT provides greater breadth of coverage relative to the current index with over 2,000 additional small-cap and micro-cap stocks. With these changes, we now have the lowest cost ETF in the market for investors seeking broad US equity exposure,” said Weiss.

By further improving cost efficiency, iShares will be looking to challenge their low cost rival Vanguard, and further secure their position in the ETF model portfolio market. The reduction in expense ratios across the seven funds became effective immediately and consist of the following revisions:

iShares Core S&P Total US Stock Market ETF (ITOT) reduced from 0.07% to 0.03%.

iShares Core US Growth ETF (IUSG) reduced from 0.09% to 0.07%.

iShares Core US Value ETF (IUSV) reduced from 0.09% to 0.07%.

iShares Core MSCI Emerging Markets ETF (IEMG) reduced from 0.18% to 0.16%.

iShares Core MSCI Europe ETF (IEUR) reduced from 0.14% to 0.12%.

iShares Core MSCI Pacific ETF (IPAC) reduced from 0.14% to 0.12%.

iShares Core Total USD Bond Market ETF (IUSB) reduced from 0.15% to 0.12%.

The iShares Core suite has already amassed over $62.8bn in assets under management since its launch in October 2012. The relative success of the fund range spurred iShares to launch similar offerings in Europe and Canada last year.