BlackRock is cutting the fee on its iShares S&P 500 index mutual fund to $1.25 per $10,000, or 0.0125%, for its largest investors. Starting July 1, investors will at least $2.5 billion will pay the lower fee, down from $4 per $10,000 previously.
The new, lower fee is just a tad above Vanguard’s 0.0100% for its S&P 500 fund for institutional investors with a minimum $5 billion invested.
The latest price cut from BlackRock, the world’s largest asset manager, continues the price war that has been raging among mutual funds and ETFs and follows previous iShares fee cuts
“It shows how the deep-pocketed asset managers are increasingly using their scale to bring index fund pricing down,” says Todd Rosenbluth Head of ETF & Mutual Fund Research, CFRA.
Dan Wiener, editor of The Independent Adviser for Vanguard Investors, notes that although the new lower iShares fee will save the institutional investor with a minimum $2.5 billion invested in the fund several hundred thousand dollars a year, the Vanguard Admiral S&P 500 mutual fund, which requires a $3,000 minimum investment, had outperformed the iShares S&P 500 Institutional fund over 10 years ended December 31, 2018 and matched its performance. Over that period of time both funds charged four basis points.
‘I don’t have $2.5 billion to invest in the S&P 500,” writes Wiener, adding that he doesn’t invest in the index. “But if I was going to buy an S&P 500 fund, I wouldn’t lose any sleep at all sticking with the proletarian Vanguard Admiral shares,” with its $3,000 minimum and 0.04% expense ratio.
In June BlackRock cut fees on 11 ETFs: seven bond funds and four equity ETFs
Asked if the firm had plans to reduce fees on any other mutual funds or ETFs soon, a spokesman told ThinkAdvisor, “The changes we made were isolated to our S&P 500 index mutual fund and independent of pricing for the rest for our index mutual fund business, iShares ETFs, and other parts of the firm.”
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