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Top Portfolio Products: BlackRock to Cut ETF Fees

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Portfolio Products logoNew products introduced over the last week include a series of geographic exposure indexes from Russell, a strategic dividend income fund from Advantus and an ETF from AdvisorShares.

In addition, BlackRock announced that it would cut fees on some of its large, liquid ETFs, and Market Vectors lowered the expense cap on one of its ETFs.

Here are the latest developments of interest to advisors:

1) BlackRock to Cut ETF Fees

After a research note issued Sept. 5 by Sanford Bernstein & Co. that said BlackRock would need to cut fees on some of its products, Bloomberg reported that the firm is doing just that, dropping fees on large ETFs after Vanguard Group outpaced BlackRock in market share.

While State Street Global Advisors said in a report that BlackRock still leads with 41% of the U.S. ETF business, that’s down 1.6% so far this year through July, while Vanguard gained 1.8% to reach 18% market share. BlackRock’s fees on some of its large and liquid iShares products are double, or even more than double, Vanguard’s fees on corresponding products, and it’s showing in the marketplace. Fee cuts are BlackRock’s response. Smaller, less liquid funds are under less pressure to drop fees.

2) Market Vectors Cuts Expense Cap for Emerging Markets Local Currency ETF

Van Eck Associates Corp. lowered the expense cap for its Market Vectors Emerging Markets Local Currency ETF (EMLC) from 49 basis points (bps) to 47 bps, effective Sept. 1. The expense cap is effective through September 1, 2013 and excludes certain expenses, such as interest.

EMLC seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the J.P. Morgan GBI-EMG Core Index (GBIEMCOR), a rules-based, market capitalization-weighted index that is designed to be investible and includes only those countries that are accessible by most of the international investor base.

3) Russell Introduces Geographic Exposure Indexes

Russell Investments introduced on Wednesday the Russell Geographic Exposure (“GeoExposure”) Index Series, four new indexes developed from existing Russell Global Indexes, that follow a rules-based methodology to identify companies with exposure to emerging markets; they then adjust the weight for each company within the index to reflect exposure significance.

The series initially consists of the Russell 1000 Emerging Markets GeoExposure Index; the Russell Developed Large Cap Emerging Markets GeoExposure Index; the Russell Developed Europe Large Cap Emerging Markets GeoExposure Index; and the Russell Developed ex-North America Large Cap Emerging Markets GeoExposure Index.

4) Advantus Launches Strategic Dividend Income Fund

Advantus Capital Management launched on Wednesday the institutional share class of the Advantus Strategic Dividend Income (SDI) Fund (VSDIX), with the goal to produce higher income than investment-grade fixed income products while managing volatility and inflation risk in a broadly diversified equity portfolio. It will be co-managed by Lowell R. Bolken, vice president; Joseph R. Betlej, vice president and portfolio manager and Craig M. Stapleton, quantitative strategies portfolio manager. The minimum initial investment is $1 million.

VSDIX’s primary investment strategy is to invest in dividend-paying equity securities including common and preferred stocks from utilities, energy, infrastructure-related, real estate-related and other companies. Typically, 50% or more of its total assets will be allocated to real estate securities. It may also invest up to 25% of its total assets in the securities of master limited partnerships (MLPs). In addition, it may invest in ETFs, ETNs, Treasury inflation-protected securities (TIPS) and futures, and may also write covered calls as it seeks to manage inflation or volatility, increase income or gain market exposure.

5) AdvisorShares Announces the Launch of the STAR Global Buy-Write ETF

AdvisorShares announced Thursday that the STAR Global Buy-Write ETF will open for trading on Tuesday. VEGA is subadvised by Partnervest Advisory Services and seeks consistent repeatable returns across all market cycles by using a proprietary strategy known as Volatility Enhanced Global Appreciation (VEGA). Partnervest employs a“buy-write” or “covered call” overlay for VEGA’s global allocation strategy using exchange-traded products (ETPs).

The strategy simultaneously writes (sells) an option against each position in order to seek cumulative price appreciation from the portfolio’s global exposure, while generating a consistent income stream from the sale of covered call and/or cash-secured put options, creating less dependence on markets for returns during downturns. When volatility is low the portfolio manager uses protective put options to manage downside risk.

Read the Sept. 7 Portfolio Products Roundup at AdvisorOne.


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