Fee cuts could be the way forward for exchange-traded fund issuers, according to one industry analyst.
IShares lowered fees on three of its prominent ETFs last week, a notable move that put the cost of owning its core S&P 500 ETF on par with Vanguard’s rival offering.
The iShares Core S&P 500 ETF (IVV)’s expense ratio is now 0.03%, down from 0.04%, the iShares Core S&P Mid-Cap ETF (IJH)’s is now 0.05%, down from 0.06%, and the iShares Core S&P Small-Cap ETF (IJR)’s is now 0.06%, down from 0.07%.
IVV’s expense ratio now matches that of the Vanguard S&P 500 ETF (VOO).
“This is tremendous. This is a huge win for investors,” Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA, told CNBC’s “ETF Edge” on Monday.
“Nearly $200 billion in assets went from 4 basis points to 3 basis points,” he said of the IVV, which had $195.7 billion in net assets as of Wednesday.
“IJR and IJH, which are the more mid-cap and small-cap-oriented products offering exposure, are also cheaper,” Rosenbluth said. “IShares is the leader in that space … in the mid-cap and small-cap [stocks] tied to the S&P 500.”
Since their inception in 2000, IVV, IJH and IJR have all outperformed the broader S&P 500. While the S&P has climbed about 114% in the last 20 years, IVV is up 124%, IJH has risen 293% and IJR is up 331%.
“We think this is great. Investors are getting nearly free exposure to track prominent S&P indices in an ETF wrapper,” Rosenbluth said.