iShares has lowered the expense ratios on several popular funds in a move that makes its already low-cost ETFs even more accessible to investors.
The affected funds include the iShares Core U.S. Aggregate Bond ETF (AGG), the iShares Core MSCI Emerging Markets ETF (IEMG), the iShares Core MSCI Total International Stock ETF (IXUS), the iShares Core International Aggregate Bond ETF (IAGG), the iShares MSCI Intl Multifactor ETF (INTF), the iShares MSCI USA Multifactor ETF (LRGF), and the iShares Core MSCI International Developed Markets ETF (IDEV), which all saw reductions in fees effective March 31.
“Advisors continue to look towards iShares to support the core of their portfolios, and now those advisors will be able to pass on savings to their end clients,” Todd Rosenbluth, head of research at ETF Trends and ETF Database, said.
In addition to popular core offerings, several of the funds seeing fee reductions are part of iShares’ suite of multi-factor funds, which offer advisors some of the attributes they would find in active management through their focus on quality and value characteristics, Rosenbluth said.
“The fee cuts will position iShares to be a potential leader within the multi-factor suite of products, which remain relevant for advisors that want more than just tracking the broader benchmarks,” Rosenbluth said.
AGG, the largest of the funds with $85 billion in assets under management, has reduced its expense ratio to three basis points from four basis points, according to regulatory filings.
The expense ratio reduction puts the fund ahead of its chief competitor, the Vanguard Total Bond Market ETF (BND), in terms of fees. BND charges a four basis point expense ratio.
AGG offers broad-based exposure to investment-grade U.S. bonds, making the fund a building block for any investor constructing a balanced long-term portfolio as well as a potentially attractive safe haven for investors pulling money out of equity markets.
According to ETF Database, AGG is unmatched in terms of liquidity due to its huge amassment of assets and significant trading volume.
Another fund giant, the $74 billion IEMG, has reduced its fees to nine basis points from 11 basis points, according to regulatory filings, bringing it nearly on par with category peer Vanguard FTSE Emerging Markets ETF (VWO), which charges eight basis points.
IEMG delivers broad exposure to emerging markets equities included in the popular MSCI emerging market benchmarks. IEMG also includes smaller-cap names, making it a staple holding of long-term investors who want exposure to emerging markets, according to ETF Database.
IEMG’s massive size makes it easy for institutional investors to buy and sell large blocks, according to ETF Database.
IXUS, which offers investors an extremely broad portfolio of international equities, lowered its fees from nine basis points to seven basis points, according to regulatory filings.
The fund has $31 billion in assets under management. IXUS provides comprehensive small-cap exposure and captures the market well, according to ETF Database, living up to the promise of serving as a core holding, with broad, deep, and unbiased coverage.
IAGG, which has $3.8 billion in assets, lowered its fees to seven basis points from eight basis points, according to regulatory filings. IAGG now carries the same expense ratio as the Vanguard Total International Bond ETF (BNDX).
IAGG provides broad exposure to investment-grade bonds from developed and emerging market issuers, excluding the U.S. The portfolio’s non-USD-denominated securities mitigate exposure to fluctuations between the value of the component currencies and the USD by hedging out foreign currency risk to the USD, according to ETF Database.
INTF sliced its expense ratio in half, falling to 15 basis points from 30 basis points, according to regulatory filings.
The fund has $914 million in assets and tracks an index of non-U.S. large- and mid-cap stocks by emphasizing four factors: quality, value, momentum, and small size, all while maintaining the risk profile of the broader universe, according to ETF Database.
This method seeks undervalued and over-performing smaller companies from the MSCI World ex USA Index by using a composite score derived from the Barra multi-factor equity model, according to ETF Database.
LRGF also made a very significant jump, slashing its expense ratio from 20 basis points to eight basis points, according to regulatory filings.
LRGF’s expense ratio reduction has allowed the fund to surpass its category peer, the Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (GSLC), in terms of affordability. GSLC charges a nine basis point expense ratio.
The popular fund, which manages $1.3 billion in assets, aims to provide a multi-factor take on U.S. equities. The fund currently pulls from the MSCI USA Index, a cap-weighted collection of large- and mid-cap U.S. stocks, according to ETF Database.
The fund has used an optimization process to increase exposure to the factors without exceeding the expected risk of the MSCI USA Index. LRGF’s constrained multi-factor exposure suggests potential use as a core U.S. equity allocation, according to ETF Database. In a separate regulatory filing, iShares announced that LRGF would shift to a new benchmark.
IDEV dropped to four basis points from its former five basis points expense ratio, according to regulatory filings. The fund, far cheaper than the category average of 37 basis points, is now on par with the $109 billion Vanguard FTSE Developed Markets ETF (VEA) in terms of expenses.
The $7.2 billion fund tracks a market-cap-weighted index of large-, mid-, and small-cap stocks from developed countries, excluding the U.S.
Tracking a free float-adjusted, market cap-weighted index of companies from all capitalizations, IDEV offers vanilla exposure to developed markets ex-U.S, according to ETF Database.
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