Published December 31, 2012
BlackRock's (BLK) iShares unit, the world's largest ETF sponsor, will raise fees on 40 of its ETFs effective January 1. The news stands as a stark contrast to the recent trendin the ETF industry that has seen major ETF issuers such as Charles Schwab (SCHW), Invesco's (IVZ) PowerShares and Vanguard pare expense ratios.
In October, iShares unveiled fee reductions of its own on several of its previously existing funds while unveiling a new lineup of low-cost ETFs targeted at cost-conscious investors.
News of the iShares fee increase was reported by Index Universe over the weekend.
The fee increases apply to some of the most well-known funds in the iShares stable, which includes about 280 products, making it by far the largest lineup of any U.S. ETF issuer. For example, the iShares MSCI Emerging Markets Index Fund (EEM), the second-largest emerging markets ETF by assets behind the Vanguard MSCI Emerging Markets ETF (VWO), will now charge 0.69 percent up from 0.67 percent per year. VWO charges just 0.2 percent while the newly minted iShares Core MSCI Emerging Markets ETF (IEMG) charges 0.18 percent.
Notably, many of the iShares ETFs that will be home to modestly higher expense ratios are funds where iShares either has cornered a particular market segment or faces little in the way of legitimate competition.
While iShares does face competition from other issuers when it comes to attracting assets to global and country-specific ETFs, the BlackRock unit is the dominant player among both developed and emerging markets funds. Arguably, it is that superior brand recognition and dominant market position that gives BlackRock some wiggle room with which to increase fees.
For example, two of 2012's best emerging markets ETFs in terms of returns the iShares MSCI Philippines Investable Market Index Fund (EPHE) and the iShares MSCI Thailand Investable Market Index Fund (THD) will see their expense ratios raised to 0.61 percent from 0.59 percent.
The same fee increase applies to the iShares MSCI Chile Investable Market Fund (ECH), the iShares MSCI All Peru Capped Fund (EPU), the iShares MSCI Israel Capped Investable Market Fund (EIS), the iShares MSCI Indonesia Investable Market Fund (EIDO), the iShares MSCI Taiwan Fund (EWT), the iShares MSCI South Korea Index Fund (EWY), the iShares MSCI Brazil Index Fund (EWZ), the iShares MSCI Brazil Small-Cap Index Fund (EWZS), the iShares MSCI South Africa Index Fund (EZA) and the iShares MSCI Turkey Investable Market Fund (TUR).
In the case of ECH, EPHE, EPU, EIS, EZA, THD and TUR, those are the only country-specific ETFs on the market today tracking those countries. Regarding, EWT, EWY and EWZ, those are by far the largest ETFs to track Taiwan, South Korea and Brazil.
A fair amount of iShares funds will see expense ratios raised to 0.53 percent from 0.52 percent. That group includes the iShares MSCI Malaysia Index Fund (EWM), the iShares MSCI Belgium Capped Fund Investable Market (EWK), the iShares MSCI France Index Fund (EWQ), the iShares MSCI Switzerland Index Fund (EWL), the iShares MSCI United Kingdom Fund (EWU), the iShares MSCI Singapore Index Fund (EWS), the iShares MSCI Mexico Investable Market Fund (EWW), the iShares MSCI Spain Index Fund (EWP), the iShares MSCI Netherlands Investable Market Fund (EWN) and the iShares MSCI EMU Fund (EZU).
EWM, EWK, EWS, EWW, EWQ, EWP and EWN are the only country-specific funds listed in the U.S. for those respective nations.
It is not all bad news for fees on iShares ETFs. The firm will lower fees on three of its ETFs, according to Index Universe. The iShares MSCI Global Minimum Volatility Index Fund (ACWV) will now charge 0.34 percent, down from 0.35 percent, while the iShares MSCI Emerging Markets Consumer Discretionary Fund (EMDI) goes to 0.68 percent from 0.69 percent. The iShares MSCI Emerging Markets Energy Capped Fund (EMEY) is also going to 0.68 percent from 0.69 percent.
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