Barclays Sees ETF Fee Wars Ahead
In the cutthroat battle for investor's money, major ETF providers are taking drastic steps; they're cutting already low fees, even lower. And BlackRock, sponsor of the iShares ETFs, finds itself right in middle of the fight. "We expect to be announcing a whole strategy in how are we addressing the fee issue related to these large, liquid, core types of ETFs," said Laurence D. Fink, the CEO of BlackRock at the Barclays 2012 Global Financial Services Conference.
Many of the investment firm's most popular iShares ETFs have higher management fees versus competing funds.
The iShares S&P 500 Index Fund (NYSEARCA:IVV), for example, charges 0.09 percent, compared with just 0.05 percent for Vanguard S&P 500 ETF (NYSEARCA:VOO). As a result, money has been flooding into the latter. VOO has around $115 billion in assets versus around $31 billion for IVV.
A more extreme example of fee disparities is with the iShares MSCI Emerging Markets Index Fund (NYSEARCA:EEM) which charges 0.67 percent annually compared with just 0.20 percent for Vanguard MSCI Emerging Markets ETF (NYSEARCA:VWO). Both ETFs invest in the same stocks from developing countries like China, Brazil, and Russia.
In fixed income, the iShares Barclays Aggregate Bond Fund (NYSEARCA:AGG) charges 0.20 percent, while the Vanguard Total Bond Market ETF (NYSEARCA:BND) charges just 0.10 percent. Both ETFs follow the same exact benchmark.
Other companies, like the Select Sector SPDRs, have continued to cut expense ratios. Over the past several years, the company has cut fees on its lineup of nine sector ETFs several times to their current level of 0.18%.
New York-basedBlackRock manages $3.56 trillion in assets and is the midst of a reorganization plan that was announced in August.
The company's U.S. iShares unit had $481 billion across 262 ETFs as of June 30, 2012, according to the ETF Industry Association. Follow us on Twitter @ETFguide