BlackRock has cut prices across its iShares Core exchange traded fund suite ahead of the new Department of Labor fiduciary rule changes, positioning its broad investment options as quality and cost-efficient alternatives in the fund space. The fee reductions beat or match the low expense ratios first established by Vanguard ETFs.
Long-term investors will now enjoy the tax efficiency, liquidity and quality of these core ETF options at a greater value. Following the changes, the iShares Core S&P 500 ETF is now among the least expensive ETF options available, outpricing options from many of its competitors, namely Vanguard, which has recently been gaining traction as a low-cost provider. However, the reigning cheapest ETF on the market is still the Schwab U.S. Broad Market ETF (NYSEArca: SCHB), which has a 0.03% expense ratio.
“As advisors and investors further consider index funds we think the Blackrock ETF and mutual fund changes will spur further adoption and likely contribute to expense cuts at other providers,” Todd Rosenbluth, Director of ETF & Mutual Fund Research, said in a note.
The lower fees have attracted a lot of attention in the investment community as more investors and advisors look to cheap, index-based options in response to costly, underperforming active funds. The SPIVA mid 2016 scorecard revealed only 19% of active large cap core funds outperformed the S&P 500 for the year ended June 2016, and only 12% and 8% of active funds outperformed in the three- and five-year periods, respectively.
A recent ETF Trends and BNY Mellon research study on the impact of the new DOL rules on the ETF industry also found that the majority of surveyed financial advisors expect to raise ETF allocations in response to the new DOL rules, citing low fees as a main factor.
“ETFs were made for DOL,” Mark Wiedman, Global Head of iShares, told ETF Trends. “We think moving first and fast will really matter.”
The fee cuts may be a tactical way for BlackRock to position its ETFs as cheap fund alternatives in response to the changing DOL rules that will shine a light on the high costs associated with actively managed funds.
“This is another critical milestone to help advisors as they prepare for the major shift the DoL fiduciary rule requires – providing investors with quality index exposures at great value in the center of their portfolios,” Salim Ramji, Head of BlackRock’s U.S. Wealth Advisory business, said in a note.
Moreover, the BlackRock cuts are seen as a natural result of scale as the iShares line of ETFs hold nearly $1 trillion in assets under management, with over $90 billion in net inflows this year.
“Today’s re-pricing of iShares Core ETFs is another example of our commitment to maximize the benefits of scale as a means to efficiently invest in our business and drive higher organic growth over time,” Gary Shedlin, BlackRock’s Chief Financial Officer, said in a note.
As of October 5, 15 iShares Core ETFs have a lower expense ratio, including:
- iShares Core S&P 500 ETF (NYSEArca: IVV): old 0.07%; new 0.04%
- iShares Core S&P Mid-Cap ETF (NYSEArca: IJH): old 0.12%; new 0.07%
- iShares Core S&P Small-Cap ETF (NYSEArca: IJR): old 0.12%; new 0.07%
- iShares Core High Dividend ETF (NYSEArca: HDV): old 0.12%; new 0.08%
- iShares Core Dividend Growth ETF (NYSEArca: DGRO): old 0.12%; new 0.08%
- iShares Core MSCI Total International Stock ETF (NYSEArca: IXUS): old 0.14%; new 0.11%
- iShares Core MSCI EAFE ETF (NYSEArca: IEFA): old 0.12%; new 0.08%
- iShares Core MSCI Europe ETF (NYSEArca: IEUR): old 0.12%; new 0.10%
- iShares Core MSCI Pacific ETF (NYSEArca: IPAC): old 0.12%; new 0.10%
- iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG): old 0.16%; new 0.14%
- iShares Core Total USD Bond Market ETF (NYSEArca: IUSB): old 0.12%; new 0.08%
- iShares Core U.S. Aggregate Bond ETF (NYSEArca: AGG): old 0.08%; new 0.05%
- iShares Core 1-5 Year USD Bond ETF (NYSEArca: ISTB): old 0.12%; new 0.08%
- iShares Core Long-Term US Bond ETF (NYSEArca: ILTB): old 0.12% new 0.08%
- iShares Core International Aggregate Bond ETF (NYSEArca: IAGG): old 0.15%; new 0.11%
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