BlackRock attracts $5 billion to lowest-cost ETFs after price cut

November 1, 2016 6:03 AM EDT

A man walks next to a BlackRock sign pictured in the Manhattan borough of New York, October 11, 2015. REUTERS/Eduardo Munoz


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By Trevor Hunnicutt

NEW YORK (Reuters) - BlackRock Inc has attracted nearly $5 billion to its lowest-cost segment of exchange-traded funds since it announced a price cut last month aimed at financial advisers, the company said on Tuesday.

The world's largest asset manager on Oct. 5 said it was lowering fees on 15 funds in its "Core" U.S. iShares ETF lineup. It touted the move as a boon for financial advisers and brokers, who will soon be governed by Labor Department regulations seen favoring inexpensive investments.

The change affected about a quarter of the nearly $1 trillion held in iShares' U.S. ETFs, bringing fees down by 2 to 5 hundredths of one percent.

BlackRock disclosed the latest sales figure while announcing more changes to the Core lineup that include adding a bond fund and a real-estate fund that will each charge 0.08 percent annually, or $8 for every $10,000 managed.

"Our aim is always going to be to provide the highest quality exposures at the best value in the marketplace," said Martin Small, BlackRock's U.S. head of iShares.

The ETFs - iShares Core 5-10 Year USD Bond ETF and iShares Core U.S. REIT ETF - are scheduled to start trading on Thursday. They replace two bond ETFs that were removed from the Core slate earlier in October.

A rule announced by the Labor Department in April and effective next year sets a so-called fiduciary standard for financial brokers who sell retirement products, requiring them to put clients' best interests ahead of their own bottom line.

The language in the new rule is tougher than existing rules that require brokers only to ensure products are "suitable."

BlackRock's iShares unit has faced intense competition from rivals, including Vanguard Group and Charles Schwab Corp. Both came later to the ETF business and have been quick to cut costs.

The average Vanguard stock ETF charges 0.09 percent, compared with Schwab's 0.18 percent and iShares' 0.40 percent, according to Thomson Reuters Lipper, a research service.

Yet all three are profiting as investors have moved money from "active" stock-picking managers to index funds.

BlackRock's iShares has taken in more than $100 billion globally this year, the company said recently.

(Reporting by Trevor Hunnicutt; Editing by Dan Grebler)



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