ETF Trends
ETF Trends

BlackRock’s ETF unit iShares is by far the largest ETF provider in the world but rivals are chipping away at the leader’s market share by competing on cost, according to a report.

“They are in the middle of a price war whether they admit it or not,” said David Nadig, director of research at IndexUniverse, in a Reuters article this week.

Specifically, ETF competitor Vanguard is enjoying strong inflows to its low-fee funds. Vanguard ETFs often undercut iShares funds on expense ratios.

The head-to-head matchup between Vanguard MSCI Emerging Markets (NYSEArca: VWO) and iShares MSCI Emerging Markets (NYSEArca: EEM) is a striking example.

The two ETFs track the same emerging market index, but VWO has an expense ratio of 0.2% while EEM charges 0.67%.

Investors have pumped $7.4 billion into VWO this year as of June 30, according to data from the ETF Industry Association. Year to date, EEM has gathered net inflows of $693 million, according to the ETF Industry Association. In 2011, investors pulled $8.5 billion from EEM, while VWO recorded net inflows of $5.3 billion last year. [Vanguard, Bond Funds Dominating ETF Flows]

Investors and advisors clearly prefer the lower-cost Vanguard ETF for emerging markets. [Bargain Hunters Flock to Vanguard Emerging Market ETF]

Vanguard ETFs are structured as separate share classes of the firm’s existing index funds. [Vanguard Indexing Guru Gus Sauter on ETFs]

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