BlackRock restructures iShares ETFs

BlackRock will delist five of its 19 US-domiciled iShares exchange-traded funds from the ASX and convert the remainder as Australian-domiciled ETFs.

The world's largest asset manager is moving towards a locally-domiciled product range and the 14 ETFs to remain on the ASX currently hold more than $7 billion in assets as at March 31.

iShares Australia head Jon Howie said the restructure comes at a time when investor demand has developed the Aussie ETF substantially.

"This has led to improved ETF liquidity and trading infrastructure from market participants, allowing ETFs on a range of international exposures to attract assets and liquidity on the ASX. This provides the right environment for a broader locally domiciled range that is more efficient for advisers and investors," Howie said.

The proposed changes will have no impact on investment exposures and management fees.

BlackRock says the locally-domiciled ETFs will simplify taxation for investors. The new Australian funds will offer distribution reinvestment to clients.

"Today's changes will make investing in iShares, and building globally diversified portfolios, easier for Australian investors and advisers by reducing administration - investors will no longer require filing W-8BEN forms when investing in iShares," Howie said.

BlackRock plans to start the restructure after the end of financial year in July.

The five dropped iShares ETFs were indexed to Russell 2000, MSCI Singapore, Global Telecom, MSCI Hong Kong and MSCI BRIC.

"We believe some exposures are better served with our remaining range, and this change will allow BlackRock to focus on exposures which are relevant to Australian investors today," the statement said.

Howie said following the success of the US ETFs, these products were imported to Australia via cross-listing on the ASX - such a structure was "drastically" less costly than if they were built from scratch.

The standard withholding tax rate applied for distribution is 30%, but if Australians submitted a form to the US tax authorities, they can reduce it to 15%.

Howie said the problem is the US taxation process isn't easy to understand and Australians must be re-certified every three years - which can be frustrating for investors.

With this new structure, BlackRock will handle all the tax paper at the fund level and the end investors won't have to worry about it, he said.

"We have been listening to investors about the administrative burdens and we expect a very positive response, particularly if you consider financial advisers who have numerous clients invested in these products.

"We expect advisers will be over the moon that we now have complete consistency across our entire product range," he said.

About 120,000 unit holders will vote on the new structure. After that, Howie expects the entire project to complete before the end of the year, resulting in every iShares product to be locally domiciled.

In October, James Waterworth was announced as BlackRock as a vice president and iShares specialist.

He first joined BlackRock in 2010 as a vice president of iShares UK and Ireland sales teams and corporate strategy based in London.

Read more: ETFiSharesBlackRockExchange traded fundsiShares AustraliaJames WaterworthJon HowieMSCI BRICMSCI Hong KongMSCI SingaporeRussell 2000
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