BlackRock has cut the management fee on two of its most popular ETFs in the package launched last week as a ‘core’ offering designed for new investors to the ETF market.
Jon Howie, the head of iShares Australia, said that in ‘Act I’, relatively sophisticated investors used iShares, with about 50 per cent of them representing institutions, usually buying offshore.
“Act I served the early adopters… Now, Act II is for newer investors who have seen the evolution of the market. Core is looking to serve their needs… It’s largely about buy and hold. It’s also about low cost and simplicity.”
He said that it was possible that ETF providers, of which BlackRock is now the largest, had offered too many products. The Core range was, to some extent, there for those who investors who might have been confused by all the choice.
There are five ETFs in the range: the S&P/ASX 200, the MSCI World All-cap hedged and unhedged versions, the Core Composite (Australian) Bond Index, and the Core Global Corporate Bond Index (hedged).
BlackRock recently cut the management fee on the ASX 200 product from 19bps to15bps, which is the lowest in the market, and with the bond ETF from 24bps to 20bps to match the lowest in the market.
A blend of the Core iShares offered an average management fee of just 17bps, Howie said. “I think that’s amazing.”
He said: “SMSF and individual investors, and the advisors and platforms they invest through, will be a key driver of ETF industry growth. Passive funds are becoming a starting point for many discussions on portfolio design and the iShares Core series gives advisers the building blocks they need to create cost effective portfolios for their clients.”
He said that while financial advisors had been leaders in ETF advocacy in Australia, their numbers were increasing and their recommended allocations had doubled in recent times. They were also starting to use ETFs in longer-term portfolios.
With Core, which is more of a marketing offering than a discrete product, Howie said BlackRock believed this was the smallest group of products an investor should use to build a robust global strategy. Investors decide their own allocations between the ETFs and can also add other ETFs for further diversification.
* Greg Bright is publisher of Investor Strategy News (Australia)