BlackRock (NYSE:BLK) is lowering the fees on three of its bond funds, including its $4 billion Total Return Fund, according to a filing with the Securities and Exchange Commission Monday morning.
BlackRock's move comes just weeks after the departure of Bill Gross from Pacific Investment Management Co.
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Gross, who managed the Pimco Total Return Fund (NASDAQ:PMBIX) and co-founded the firm over 40 years ago, resigned on Sept. 26 to join rival Janus Capital Group (NYSE:JNS). Investors pulled a massive $25.5 billion from PIMCO's U.S. open end funds in September, according to Morningstar data.
Institutional shares of the BlackRock Total Return Fund will drop to 45 basis points, from 52 basis points, putting it in line with Pimco's Total Return fund, which charges 46 basis points for institutional shares. Fees for A-shares of the BlackRock Total Return Fund will drop to 79 basis points from 83 basis points.
“BlackRock regularly evaluates fund fees and expenses to ensure that they remain competitive as the marketplace evolves," a spokeswoman said in a statement. "By implementing the new voluntary expense caps, BlackRock believes that the portfolios’ expenses will be even more attractive.”
The New York based asset manager also is lowering fees on institutional shares for the BlackRock Core Bond Fund to 45 basis points, down from 56 basis points.
B-shares of the BlackRock Low Duration Bond Fund will now cost 154 basis points down from 162 basis points, according to the filing.
By lowering the fees just seven basis on the institutional shares of its $4 billion Total Return Fund, BlackRock will likely win over many investors, including advisers, 401(k) plans and pension plans, that were considering moving away from Pimco, said Jeff Tjornehoj, head of research at Lipper Americas.
The institutional BlackRock Total Return Fund has outperformed its peers for the past one, three and five years, ranking among the top decile of its category, according to Morningstar.
Meanwhile, Pimco's $201.6 billion Total Return Fund, the world's largest, has underperformed its peers for the past year. It has beaten its peers by just 1.6 percent for the past three years, and by just 0.29 percent for the past five years, according to Morningstar.
"This is a shot across the bow at Pimco as a means to persuade more investors that you can get even better performance over the long run with BlackRock at a cost that is equivalent," Tjornehoj said.
Pimco was not immediately available for comment.
(Reporting By Jessica Toonkel; Editing by W Simon)
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