The move comes ahead of a key Labor Department ruling that goes into effect in 2018. The mandate requires brokers to put clients’ interests first when handling retirement investments, and BlackRock believes the change will trigger a mass exodus away from higher-cost funds and into low-cost ETFs.
Lower fees are great news for investors, who stand to save billions of dollars over the long term as a result. From Bloomberg:
The iShares lineup will feature lower expense ratios on 15 stock and bond funds aimed at buy-and-hold investors, BlackRock said Wednesday in a statement. Starting today the $80 billion iShares Core S&P 500 ETF, for example, will charge 4 basis points, or $4 a year per $10,000 invested, instead of 7, while the $42 billion iShares Core U.S. Aggregate Bond ETF will cost clients $5 instead of $8.
BlackRock is attempting to get ahead of the impending regulatory change, and attract investment dollars now:
“A new era is dawning for advisers and long-term investors of all kinds,” Mark Wiedman, global head of iShares, said in the statement. “To meet this historic shift, we aim to set a new market convention for core investing.”
The fee cuts affect 15 BlackRock-owned iShares ETFs and cover some $216 billion in assets. The lower expenses on those funds will put them at or below similar ETFs from competitors Vanguard and State Street.
ETF issuers have steadily cut the management fees they charge over the past several years, as competition heats up in the space:
In 2015, BlackRock cut fees to as low as 0.03 percent on seven U.S.-listed ETFs targeting price-conscious investors. The firm is competing with Vanguard Group, whose broad-market ETFs have lured individual investors.
Bloomberg Intelligence estimates that BlackRock and Vanguard combined have attracted about 80% of the $157 billion in total ETF inflows this year, as investors and managers flock to low-priced fund options amid the ongoing ETF revolution.
BlackRock shares were unchanged in premarket trading Wednesday at $356.03. Year-to-date, BLK has gained 4.55%, putting it roughly in-line with the S&P 500’s 5.29% return during the period.