BlackRock’s iShares maintains a dominant position in the exchange traded fund space, but the firm is losing ground to its low-cost competitors, namely Vanguard, but the giant won’t implement an aggressive price-cutting plan, ETF researchers say.
Bernstein Research analyst Luke Montgomery believes that BlackRock (NYSE: BLK) will most likely focus on targeted price cuts in response to Vanguard’s gain in market share, Reuters reports.
“An across the board price cut would seem unjustified, as it could fail to generate market share gains and would simply damage the firm’s earning power,” according to a Bernstein Research report.
In the report, Montgomery calculates that the potential price cuts could diminish BlackRock’s earnings per share by 3% to 7%, but it would also attract more investors and increase assets under management by up to 1% per year.
BlackRock had been reluctant in addressing the loss of market share as a direct result of lower fees offered by competitors. However, in early July, BlackRock Chief Executive Officer Laurence Fink acknowledged that Vanguard‘s lower fees were drawing greater investor interest. [In the ETF Price War, Investors Win]
Vanguard “has taken market share from BlackRock in the U.S. core type of equity products,” Fink said during BlackRock’s second-quarter earnings call.
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Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.