There is a fee war raging in the ETF business but so far the cost cuts have been centered in so-called core funds that focus on wide swaths of the stock and bond markets. ETF providers are battling for market share in these broad-based funds where buy and hold investors and financial advisors see fees as a very important factor when selecting individual funds.
For example, this week BlackRock (NYSE: BLK) cut fees at some highly diversified ETFs and created the new iShares Core Series targeting long-term investors. [BlackRock Hits Back at Vanguard, Schwab with iShares ETF Fee Cuts]
BlackRock, the largest ETF manager, on Wednesday reported higher third-quarter earnings that were fueled in part by expansion in its ETF business.
The New York asset manager said investors added $25.2 billion to its iShares ETFs, the best quarter since 2009. ETF rival State Street (NYSE: STT) also reported third-quarter results this week. [ETFs Help Drive Earnings at State Street]
“We achieved a milestone in our iShares business, with the highest net new business production since our merger with Barclays Global Investors in December 2009,” said BlackRock CEO Larry Fink in the earnings release. “We hold the number one market share of year-to-date industry flows. This week, we introduced our new iShares Core series for buy-and-hold investors, launched a revitalized iShares brand campaign and began to integrate our U.S. iShares and BlackRock retail sales forces. These initiatives are the first phase of a broader, global strategy to drive enhanced growth in the iShares platform.”
“As clients continue expanding the ways they’re using ETFs, our iShares business is firing on all cylinders,” said BlackRock President Robert Kapito during the earnings call Wednesday. “Our goal is to continue to be the leading ETF provider in every region around the world. But being the global leader requires that we constantly adapt to meet changing client needs and to expand into new client segments.”