BLK BlackRock Inc

By Daisy Maxey 

A BlackRock Inc. exchange-traded fund can now claim the title of the lowest-cost stock ETF--but it probably won't have that distinction to itself for long.

BlackRock, the largest global provider of ETFs, on Tuesday cut fees on seven of its iShares Core ETFs. That included trimming the annual expenses of the $2.7 billion iShares Core S&P Total U.S. Stock Market ETF to 0.03% of assets from 0.07%, bumping a pair of Charles Schwab Corp. ETFs from the lowest-cost spot.

Within hours, Schwab vowed to match the cut on its $4.9 billion Schwab U.S. Large-Cap ETF, which currently has expenses of 0.04%. "Our intention has always been to be the price leader in the ETF space, and we're going to maintain that," said a Schwab spokesman, who didn't give a time frame for that company's planned move.

Low fees have been one of the big attractions of ETFs and providers have competed fiercely to whittle down their charges by additional hundredths of a percentage point. The latest cuts by BlackRock are being viewed as a challenge to Vanguard Group, the No. 2 in ETF assets, as well as a sign of the success of BlackRock's iShares Core ETF lineup, launched three years ago.

The giants of the ETF business are BlackRock, with $818 billion in U.S. ETF assets under management; Vanguard, at $479 billion; and State Street Global Advisors, the asset-management business of State Street Corp., at $418 billion, according to Thomson Reuters Lipper. Schwab is a distant No. 7, with $38 billion in U.S. ETF assets, according to Thomson Reuters Lipper.

BlackRock's iShares Core ETFs, which now number 20, are marketed as simple and low-cost portfolio building blocks. The lineup has grown to $160 billion in assets as of Sept. 30, according to BlackRock.

"Many of these products are among the best products in their investment style, partially because of the costs and partially because of how they're run and the indexes they track," said Todd Rosenbluth, director of ETF research at S&P Capital IQ.

The iShares Core lineup has been helping BlackRock compete with Vanguard, said Ben Johnson, director of global ETF research at Moningstar Inc. At the time the lineup was rolled out, "BlackRock had been losing market share pretty regularly to Vanguard," Mr. Johnson said. The Core lineup has been an effort "to stop the bleeding and try to claw back lost growth," he said. "Signs thus far are promising from BlackRock's point of view.... Very few have the scale to be able to compete so fiercely by slashing fees."

At Vanguard, a spokesman said, "Being an all-the-time, across-the-board cost leader is in our DNA.... Other investment firms may lower costs on a small subset of funds or have a separate brand of low-cost products as a business strategy to attract assets." A number of Vanguard funds, including the Vanguard Total Stock Market ETF, charge expenses of 0.05%.

By one measure, these super-low-cost stock ETFs aren't actually the cheapest ETFs in the U.S.: BlackRock's iShares Treasury Floating Rate Bond ETF currently has no expenses as the company is waiving its usual 0.15% fee, Thomson Reuters Lipper said.

Write to Daisy Maxey at daisy.maxey@wsj.com

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(END) Dow Jones Newswires

November 10, 2015 17:29 ET (22:29 GMT)

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