BlackRock (NYSE:
BLK
), the world's largest asset management firm and parent company
of the iShares ETF sponsor, is firing back at Vanguard in what is
fast becoming the most heated rivalry in the exchange-traded
products industry.
On Monday afternoon, headlines hit the wires that BlackRock is
planning
to pare fees on some of its ETFs by up to 65
percent
, making good on a previous promise by CEO Larry Fink to do so in
an effort to regain lost market share to Vanguard.
BlackRock also issued a statement saying it plans to roll out
the iShares Core Series, "a suite of 10 U.S. ETFs designed for
the needs of long-term, buy-and-hold investors that combines
competitive pricing with diversified, tax-efficient products
using premier index providers."
The iShares Core Series will be comprised of four new and six
existing funds targeted at cost-conscious, buy-and-hold
investors. Vanguard, the third-largest U.S. ETF sponsor, has
excelled at gaining assets, particularly with cost-conscious,
long-term investors because its fees are among the lowest in the
ETF business.
"As we look to build on our market-leading position in the ETF
industry, we are taking a number of steps to further bolster our
value proposition for investors, with an initial focus on the
United States," said Mark Wiedman, Managing Director and Global
Head of iShares,
in the statement
. "The combination of our iShares Core Series targeting
buy-and-hold investors and a campaign to refresh the powerful
iShares brand - supported by what will now be the industry's
largest U.S. retail sales force - are key components of our
broader plan to drive even stronger growth in the U.S. and
globally."
The Core Series will include funds such as the iShares S&P
500 Index Fund (NYSE:
IVV
), the iShares MSCI Emerging Markets Index Fund (NYSE:
EEM
), the iShares MSCI EAFE Index Fund (NYSE:
EFA
) and the iShares S&P MidCap 400 Index Fund (NYSE:
IJH
). The funds will be rebranded as the iShares Core S&P 500
ETF, iShares Core MSCI Emerging Markets ETF, iShares Core MSCI
EAFE ETF and iShares Core S&P Mid-Cap ETF.
"We believe that every investor is unique, and with the
iShares Core Series, investors have the opportunity to match
their large, long-term core holdings to their individual needs
and still have the flexibility to complement them with more
specialized ETFs that suit their specific objectives," Wiedman
said in the statement.
MSCI
News that iShares is sticking by index provider MSCI (NYSE:
MSCI
) could be seen as welcome relief for shareholders of that
company. On heavy volume, shares of MSCI slid into the close
Monday, perhaps on speculation that iShares would drop MSCI
indexes and choose a self-indexing approach. Monday's slide for
MSCI follows the stock's worst one-day performance on record,
which occurred earlier this month
when Vanguard announced it was dropping MSCI
indexes on 22 of its ETFs
.
At the time, iShares stood by MSCI, calling the firm the "gold
standard" in indexes. That view was reiterated by Wiedman in
today's statement.
"MSCI is the predominant choice of professional investors and
we're pleased to deepen our relationship with them through the
introduction of these new products using their indexes to help
deliver high quality portfolio construction to all investors
small and large," he said.
Rivalry Intensifies
Low-cost challengers such as Vanguard and Charles Schwab (NYSE:
SCHW
) have made inroads in the ETF industry through a combination of
rock-bottom fees and commission-free trading offers to clients.
Vanguard in particular has been viewed as a thorn in the side of
iShares.
Vanguard has undercut iShares on pricing on a variety of ETFs,
stoking what some have deemed to be an intense rivalry. For
example, VWO was once smaller than EEM, but by significantly
undercutting EEM on fees, VWO is now the largest emerging markets
ETF by assets and the gap is so wide between the two funds, the
competition has been all but dead for months, if not longer.
Still, those that say Vanguard is close to wresting the crown
of largest ETF issuer from iShares seem to be overlooking some
critical factors. First, as iShares pointed out in the statement,
it has attracted $50 billion in ETF inflows this year through
September 30. That is more than any other ETF firm.
Second, the assumption that Vanguard will soon topple iShares
either ignores the fact that
a worthy competitor resides in between iShares
and Vanguard
. That being State Street's (NYSE:
STT
) State Street Global Advisors unit. SSgA is the second-largest
U.S. ETF issuer had AUM lead on Vanguard of about $80 billion as
of early September and it also must be noted that the sector
SPDRs are slightly cheaper than the equivalent Vanguard sector
ETFs.
For more ETF rivalries, click
here
.
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