BlackRock Seeks to Run ETFs Using Own Indexes

Move seen as a way to cut fees in increasingly crowded marketplace

BlackRock, the world’s largest money manager, filed an application with the SEC for its iShares exchange-traded funds to follow its own indexes rather than those developed by third parties such as Standard & Poor’s.

According to Bloomberg, the application, filed on Aug. 25 “would allow future and existing funds to use in-house indexes the firm will create.”

The news service notes iShares, a San Francisco-based subsidiary of BlackRock, ranks as the biggest provider of index-based ETFs with some $649 billion in assets under management in more than 460 funds.

“The ETF industry is becoming increasingly crowded, prompting managers to cut fees in order to attract and retain assets Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott, told Bloomberg.

“Offering funds based on proprietary indexes would help New York’s BlackRock set itself apart from rivals and burnish the company’s brand name,” added George Simon, a securities attorney at Foley & Lardner in Chicago. “The game here in the ETF world is to find exclusive licenses that you can offer that other people can’t. What better way to do that than offer your own, assuming they have some intrinsic value.”

Christine Hudacko, a spokeswoman for iShares, declined to comment on Bloomberg’s story.

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