iShares, the world's biggest ETF company, today rolled out the
four new "core" funds it promised to launch last week as part of
its now-completed initiative to compete with low-cost providers
such as Vanguard that have been poaching market share from it over
the past several years.
The new "core" funds are largely based on broader indexes than
the funds they will complement, which means they are more pure
indexing tools and are thus more appropriate for long-term
buy-and-hold types of investors. Part of that buy-and-hold design
is related to the fact that the ETFs will own more smaller-cap
companies, which are harder to buy and sell, and that, in turn
discourages too much trading.
The new lineup of "Core" funds from San Francisco-based iShares
also includes six existing funds, two of which were reorganized
with new tickers on Oct. 17 and four others that will remain the
same. All six have considerably lower expense ratios than before.
With today's launches, the rollout of the new brand within the
iShares universe of 276 U.S.-listed ETFs is complete.
All 10 'Core' funds are competitively priced, with expense
ratios that are lower in some cases than competing products from
Valley Forge, Pa.-based Vanguard. Vanguard, a firm owned by its
fund holders that sells its products at cost, has been able to
build market share aggressively in the past few years, in large
part at the expense of publicly traded companies such as iShares, a
unit of BlackRock Inc.
The four new ETFs iShares is rolling out today, and each fund's
expense ratio, are as follows:
- iShares Core MSCI Total International Stock ETF
(NYSEArca:IXUS), which will have an expense ratio of 0.16
- iShares Core MSCI Emerging Markets ETF (NYSEArca:IEMG), which
will have an expense ratio of 0.18 percent. By comparison, its
flagship iShares MSCI Emerging Markets Index Fund (NYSEArca:EEM)
costs 0.67 percent a year and the $58 billion Vanguard MSCI
Emerging Markets ETF (NYSEArca:VWO) is priced at 0.20
- iShares Core MSCI EAFE ETF (NYSEArca:IEFA), which will have
an expense ratio of 0.14 percent. By comparison, its existing
iShares MSCI EAFE Index Fund (NYSEArca:EFA) costs 34 bps and the
Vanguard MSCI EAFE ETF (NYSEArca:VEA) costs 0.12 percent.
- iShares Core Short-Term U.S. Bond ETF (NYSEArca:ISTB), which
will have an expense ratio of 0.12 percent. It is a short-dated
aggregate bond fund that compares with the Vanguard Short Term
Bond ETF (NYSEArca:BSV), which costs 0.11 percent.
The two funds that were rebranded as of Oct. 17 are:
- iShares Core S&P Total U.S. Stock Market ETF
(NYSEArca:ITOT) has a price tag of 0.07 percent, whereas when it
previously traded under the symbol "ISI," it had an expense ratio
of 0.20 percent.
- iShares Core Long-Term U.S. Bond ETF (NYSEArca:ILTB) has a
price tag of 0.12 percent, whereas when it previously traded
under the symbol "GLJ," it had an expense ratio of 0.20
The four funds that have retained their tickers but began
trading Oct. 17 at cheaper prices are:
- iShares Core Total U.S. Bond Market ETF (NYSEArca:AGG) now
has an annual expense ratio of 0.08 percent, compared with its
previous price tag of 0.20 percent. Vanguard's comparable
Total Bond Market ETF (NYSEArca:BND) costs 0.10 percent a
- iShares Core S&P 500 ETF (NYSEArca:IVV) now has an annual
expense ratio of 0.07 percent, compared with its previous price
tag of 0.09 percent. The Vanguard S&P 500 ETF (NYSEArca:VOO)
costs 0.05 percent.
- iShares Core S&P Mid-Cap ETF (NYSEArca:IJH) now has an
annual expense ratio of 0.15 percent, compared with its previous
price tag of 0.21 percent.
- iShares Core S&P Small-Cap ETF (NYSEArca:IJR) now has an
annual expense ratio of 0.16 percent, compared with its previous
price tag of 0.22 percent.
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