BlackRock Announces a Surprise Hike On ETF Fees

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BlackRock Announces a Surprise Hike On ETF Fees
By BlackRock [Public domain], via Wikimedia Commons

BlackRock, Inc. (NYSE:BLK) will increase the fees for iShares, the largest family of exchange traded funds (ETFs) worldwide, starting January 1.

BlackRock Announces a Surprise Hike On ETF Fees

Based on its latest regulatory filing, BlackRock, Inc. (NYSE:BLK) will increase fees across its 40 funds including its two largest funds iShares MSCI Emerging Markets Indx (ETF) (NYSEARCA:EEM) and iShares MSCI Brazil Index (ETF) (NYSEARCA:EWZ). The company will also raise its fees on its popular single-country equity funds.

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A report from Index Universe suggested that iShares might be leveraging on the primacy of MSCI among institution investors, who are willing to pay more for MSCI-based funds instead of cheaper funds intended for non-MSCI indexes.

The iShares fee increases are reasonable. For example, the fee for ishares MSCI Canada Small Cap Index Fund (BATS:EWCS) will increase by 0.1 percent from 0.52 percent to 0.53 percent, while the iShares MSCI BRIC Index Fund (ETF) (NYSEARCA:BKF) will increase by 3 percent from 0.67 percent to 0.69 percent.

In addition, the company also announced that it will reduce its fees on three other ETFs with MSCI Indexes, including  iShares MSCI Global Minimum Volatility Index Fund from 0.35 percent to 0.34 percent; iShares MSCI Emerging Markets Consumer Discretionary Fund and  iShares MSCI Emerging Markets Energy Capped Fund  both from 0.69 percent to 0.68 percent.

BlackRock, Inc. (NYSE:BLK) recently launched 10 core brands of cheap ETFs as part of its commitment to boost its ETF lineup and ability to compete with Vanguard, State Street and other ETF companies. Many in the ETF industry considered this to be a move in the right decision. The new funds cost 0.18 percent per year, which is almost 75 percent cheaper than EEM.

BlackRock EEM lost its competitiveness against Vanguard MSCI Emerging Markets ETF (NYSEARCA:VWO) in the past few years because it is cheaper. The new annual expense ratio for EEM is 0.69 percent or $69 for every $10,000 investment, up from $67. On the other hand, the annual expense ratio for VWO is $0.20 percent.

H/T Jason Zweig

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