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.”

He explained that BlackRock sees three distinct user groups of ETFs in the U.S.

“First are active capital markets participants who need deep liquidity and derivative capabilities. Second are those who look to ETFs for precise specialized exposure. And third are those who are buy and hold investors and broad core exposures. We have a very strong position with clients in the first two segments,” Kapito said.

However, BlackRock has faced “increased competition” with buy and hold investors.

“So we’ve created a new suite of products targeted directly at this market segment. Now, to be clear it is important to understand that by buy and hold, we don’t mean retail. We mean investors of all stripes, large and small, that invest for the long time horizon,” Kapito said.

“So to be the leader in all development segments, we need to tailor products and services to different clients’ needs. Because investors that seek core portfolio products to buy and hold for the long term value price over other attributes, we have created a suite of products tailored just for them,” he added.

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