BlackRock is cutting fees for its large exchange-traded funds next quarter in response to pricing pressure from the Vanguard Group, Bloomberg reports.
“We expect to be announcing a whole strategy in how are we addressing the fee issue related to these large, liquid, core types of ETFs,” said Larry Fink, chief executive officer of BlackRock, at the Barclays 2012 Global Financial Services Conference.
Year to date, BlackRock’s U.S. market share in the ETF business fell to some 41% through July, compared with an increase of 1.8 percentage points for Vanguard to 18%, Bloomberg noted, citing a report by State Street Global Advisors. The pub also noted that the iShares Standard & Poor’s 500 Index Fund charges nine basis points compared with five bps for Vanguard S&P 500 ETF. Also, the iShares Barclays Aggregate Bond Fund (AGG) charges 20 bps versus 10 bps for the Vanguard Total Bond Market ETF (BND).
Smaller and less liquid products aren’t under pressure to cut fees, and the firm is seeing increasing margins in other ETFs, according to Fink, who added that BlackRock’s revenue for U.S. ETFs has increased 8% this year and 13% outside of the U.S.