BlackRock is slashing fees on ETF-style ETFs from $ 7.6 billion to near zero

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(Bloomberg) – BlackRock Inc.’s revamped ETF range valued at $ 7.6 billion offers new benchmarks, different tickers, and one advantage: ultra-low fees.

The world’s largest exchange-traded fund issuer is reducing the expense ratios for nine US Equity Style Box ETFs from iShares Morningstar to 0.03% to 0.06%. This is less than previous fees which were between 0.25% and 0.30%. These products, which focus on specific approaches such as company size and growth or value investing, now track Morningstar Broad Style indices, which were launched in January.

Fees have become a battleground in the fast growing $ 6 trillion ETF industry, where competition has led some of the largest funds to drive costs down to the industry’s lows. BlackRock got involved in a competition with runner-up Vanguard Group for flows, the latter winning for the first time since 2013 last year. In the meantime, niche issuers like Cathie Woods Ark Investment Management have made their way into the rankings as investors rave about themed funds.

The decision to lower fees reflects BlackRock’s commitment to be the leading ETF provider in every segment of the industry, including the nascent themed arena, according to iShares Americas director Armando Senra. Back in June, BlackRock cut the expense ratio of its largest fund – the $ 258 billion iShares Core S&P 500 ETF – to 0.03% to keep up with a competing product from Vanguard.

“We wanted to be incredibly competitive in the market for this cost-conscious buyer,” Senra said in a telephone interview.

Before the fee cuts, BlackRock-style ETFs were expensive compared to their peers. The largest $ 2.3 billion iShares Morningstar Growth ETF – formerly known as the iShares Morningstar Large-Cap Growth ETF – has an expense ratio of 0.04% compared to 0.25% previously. This puts the fund in line with the Vanguard Growth ETF fee of $ 68 billion.

In addition to the profound changes, the Style funds will also go through stock splits with different ratios in April. Senra said model portfolios – both from BlackRock and outside firms – are a key focus of the company. Many of these are built with small account sizes, often under $ 10,000, said Chad Slawner, BlackRock’s head of US product iShares.

“A lot of the companies that give us feedback want lower stock prices in order to build the models appropriately,” said Slawner.

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