BlackRock cuts fees on Aussie shares ETF

BlackRock has slashed the fees on its S&P/ASX 200 exchange-traded fund following a pricing review, as competition heats up in the sector.

The iShares Core S&P/ASX 200 ETF, which trades on the exchange with ticker IOZ, pushed down the fees to 0.09% p.a. from the 0.15%.

"This change is part of the regular review of our pricing strategy, reflecting our continued growth and ability to leverage our scale for the benefits of clients," BlackRock iShares Australia head Christian Obrist said in a statement.

This 6bps drop brings it close to the cheapest ASX 200 passive ETF exposure from Betashares which charges 0.07% p.a. and uses a different index provider.

Rainmaker Information head of investment research John Dyall said: "This is a good example of scale and competition combining to provide better outcomes for investors. These are headline products for these managers. It's important they have them as part of their clients' long term core portfolios."

IOZ's new fee structure came into effect at last week's trading.

As a part of the review, BlackRock also cut fees on a core international shares ETF (IWLD, 16 bps to 9pbs) and its hedged version (IHWL, 19bps to 12pbs). These were effective May 24.

Fees trend down, competition heats up

Fees for market-cap index ETFs have fallen 20% over the six years to December 2018.

"My view is that [BlackRock's fee cut for IOZ] happened because of the low cost threat from the BetaShares Australia 200 ETF, which in 15 months has gained around 6% of the Australian equities large cap index space with an MER of seven basis points," Dyall said.

"In comparison iShares has around 16% of that market (down from 18% 12 months ago), State Street 39% (down from 46% 12 months ago) and Vanguard 39% (up from 35% 12 months ago)."

The iShares S&P/ASX 200 last dropped it price in January 2016 from 19 basis points to 15 basis points in order to compete with the Vanguard Australian Shares Index ETF, which was 14 basis points at the time, he said.

"Interestingly, that price move happened within two months of the SPDR S&P/ASX 200 Fund dropping its fees from 29 basis points to 19 basis points."

BlackRock was the second largest ETP manager in Australia with over $12 billion of the industry's total $45.8 funds under management to March end.

Read more: BlackRockiSharesBetaSharesVanguardChristian ObristJohn DyallRainmaker InformationSPDR
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