BlackRock Inc., the world’s largest issuer of exchange-traded funds, is winning a battle to attract investors with lower fees, even as success takes its toll.
The iShares Broad USD High Yield Corporate Bond ETF, ticker USHY, added a record $368 million Thursday, after discreetly slashing its fee in March. BlackRock’s move came after State Street Corp. lowered the price of one of its junk funds, and was followed by Deutsche Bank AG’s DWS Group two weeks later.
USHY is the only one of the three funds — which now all charge $1.50 for every $1,000 invested — to add more than $50 million since the fee cuts, data compiled by Bloomberg show.
Asset managers are reluctantly accepting lower revenue in exchange for market share as investors seek out the cheapest products. More expensive junk funds run by BlackRock and State Street lost money to withdrawals this week.
“This is being driven by the fee compression,” said Todd Rosenbluth, the director of ETF research at CFRA. “You get a snowball effect when there’s money moving into the newer high-yield bond ETFs. It can generate greater interest from other investors because they see the trades were executed in a favorable manner and ask ‘why can’t I do that too and pay less money?’”