BlackRock Slashes Fees On Several Multifactor ETFs

December 27, 2016 7:08am NYSE:LRGF

yield-down

From Zacks: The ETF industry is witnessing phenomenal growth and currently commands assets under management of $4.1 trillion. Thanks to growing competition in the ETF business, there has been a race to the bottom with regard to costs in order to gain market share.


While many issuers have entered the fray, the lowest cost corner of the market is generally dominated by Charles Schwab and Vanguard. However, several other issuers are looking for a bigger pie in the ETF market and to that end have slashed their fees considerably. Earlier this year, Fidelity slashed fees equally across 11 sector ETFs to 8.4 bps from 12 bps, marking a decrease of 3.6 bps. The discounts came as part of a broader fee reduction in Fidelity’s offerings (read: Fidelity Slashes Fees for 11 Sector ETFs).

The world’s largest asset manager, BlackRock Inc. has also announced a series of fees cuts. As per a SEC filing by iShares division at BlackRock, fees are being slashed for nine ETFs including two core ETFs, six multifactor ETFs and a short-term bond ETF. This is the second time BlackRock has announced fee cuts for ETFs. In October, it had cut price for 15 core ETFs including iShares Core S&P 500 ETF (IVVFree Report) . Prior to this, in November 2015, BlackRock slashed the expense ratio for iShares Core S&P Total Stock Market ETF (ITOTFree Report) to mere 0.03% (read: Buy These ETFs as BlackRock Cuts Fees).

In its latest bout of fees cuts, BlackRock lowered the fees for some of the ETFs by as much as 20 basis points. Here are the 15 ETFs that witnessed fees cuts:

Multifactor ETFs

iShares Edge MSCI Multifactor USA ETF (LRGFFree Report) – from 0.35% to 0.20%
iShares Edge MSCI Multifactor USA Small-Cap ETF (SMLFFree Report) – from 0.50% to 0.30%.
iShares Edge MSCI Multifactor Intl ETF (INTFFree Report) – from 0.45% to 0.30%
iShares Edge MSCI Multifactor Intl Small-Cap ETF (ISCFFree Report) – from 0.60% to 0.40%
iShares Edge MSCI Multifactor Emerging Markets ETF (EMGFFree Report) – from 0.65% to 0.45%
iShares Edge MSCI Multifactor Global ETF (ACWFFree Report) – from 0.50% to 0.35%.

Core ETFs

iShares Core Russell U.S. Growth ETF (IUSGFree Report) – from 0.07% to 0.05%
iShares Core Russell U.S. Value ETF (IUSVFree Report) – from 0.07% to 0.05%

Bond ETF

iShares Ultra Short-Term Bond ETF (ICSHFree Report) – from 0.18% to 0.08%.

Competition

The move by BlackRock brings its multifactor ETFs with new lower expense ratio in close competition with low-cost Goldman Sachs Group Inc. multifactor products. The issuer is looking to attract individual and institutional investors who seek to pay lower expenses for actively managed funds.

The launch of multifactor ETFs has been most popular strategy this year. As per data compiled by Bloomberg, multifactor ETFs have been dominant among other launches. Even Wells Fargo plans to enter the ETF market with a multifactor ETF next year. As per Morningstar Inc., there are a total of 204 multifactor ETFs with approximately $39 billion assets under management.

Competition in the ETF market is cut throat. So the expense ratio war is likely to continue in the near term. Several asset managers are ready to further reduce fees to attract investors’ fund and gain market share.

The iShares Edge MSCI Multifactor USA ETF (NYSE:LRGF) was unchanged in premarket trading Tuesday. Year-to-date, LRGF has gained 13.08%, versus a 10.74% rise in the benchmark S&P 500 index during the same period.

LRGF currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #53 of 108 ETFs in the Large Cap Blend ETFs category.

This article is brought to you courtesy of Zacks Research.


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