BlackRock fights secret fee war for junk-debt ETF assets
A covert price war is raging between money managers looking to lure junk-bond investors.
BlackRock has slashed the cost of its iShares Broad USD High Yield Corporate Bond ETF (USHY) by waiving part of the management fee, regulatory documents show. But rather than shout about the move, the discount was announced without fanfare — in a footnote on page 94 of a revised filing last month.
The largest ETFs that track the two asset classes posted about $3.1 billion of withdrawals last week.February 5
The fund will give investors exposure to noninvestment-grade bonds for less than half the cost of its flagship high-yield offering.October 27
The outflows have rekindled a popular concern that the funds could portend the start of a liquidity crunch.June 2
Such stealth may be a sign of a new front in the fee war. Fund providers’ profit margins are increasingly under threat from a relentless push toward zero, with Salt Financial last month attracting a wave of headlines by offering to pay investors to buy its new fund. Now issuers seem to be choosing discretion over publicity; Deutsche Bank’s DWS also recently buried a high-yield fee cut in a filing with the U.S. watchdog.
“We review the competitiveness of our product line-up on an ongoing basis, and decided to reduce fees for HYLB to ensure its position as the most cost-efficient high-yield ETF in the U.S. market,” Oksana Poltavets, a DWS spokeswoman said of that reduction. Melissa Garville, a spokeswoman for BlackRock, declined to comment beyond the filings.
With its waiver, USHY will charge just $1.50 for every $1,000 invested in the fund, according to a March 15 filing. A revamped State Street fund, the SPDR ICE BofAML Broad High Yield Bond ETF (CJNK) will charge $1.50 from April 1, its issuer announced March 1. DWS’s Xtrackers USD High Yield Corporate Bond ETF (HYLB) also costs $1.50 after a fee waiver, a March 29 document shows.
Junk debt was last a major battleground in the fee war in October 2017, when BlackRock and DWS cut and counter-cut their fees on USHY and HYLB. The largest high-yield ETF — BlackRock’s iShares iBoxx High Yield Corporate Bond ETF — still charges $4.90 for every $1,000 invested, data compiled by Bloomberg show.