iShares, the world’s biggest ETF company, today rolled out the four new “core” funds it promised to launch last week as part of its now-completed initiative to compete with low-cost providers such as Vanguard that have been poaching market share from it over the past several years.
The new “core” funds are largely based on broader indexes than the funds they will complement, which means they are more pure indexing tools and are thus more appropriate for long-term buy-and-hold types of investors. Part of that buy-and-hold design is related to the fact that the ETFs will own more smaller-cap companies, which are harder to buy and sell, and that, in turn discourages too much trading.
The new lineup of “Core” funds from San Francisco-based iShares also includes six existing funds, two of which were reorganized with new tickers on Oct. 17 and four others that will remain the same. All six have considerably lower expense ratios than before. With today’s launches, the rollout of the new brand within the iShares universe of 276 U.S.-listed ETFs is complete.
All 10 "Core" funds are competitively priced, with expense ratios that are lower in some cases than competing products from Valley Forge, Pa.-based Vanguard. Vanguard, a firm owned by its fund holders that sells its products at cost, has been able to build market share aggressively in the past few years, in large part at the expense of publicly traded companies such as iShares, a unit of BlackRock Inc.
The four new ETFs iShares is rolling out today, and each fund’s expense ratio, are as follows:
- iShares Core MSCI Total International Stock ETF (NYSEArca: IXUS), which will have an expense ratio of 0.16 percent
- iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG), which will have an expense ratio of 0.18 percent. By comparison, its flagship iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM) costs 0.67 percent a year and the $58 billion Vanguard MSCI Emerging Markets ETF (NYSEArca: VWO) is priced at 0.20 percent
- iShares Core MSCI EAFE ETF (NYSEArca: IEFA), which will have an expense ratio of 0.14 percent. By comparison, its existing iShares MSCI EAFE Index Fund (NYSEArca: EFA) costs 34 bps and the Vanguard MSCI EAFE ETF (NYSEArca: VEA) costs 0.12 percent.
- iShares Core Short-Term U.S. Bond ETF (NYSEArca: ISTB), which will have an expense ratio of 0.12 percent. It is a short-dated aggregate bond fund that compares with the Vanguard Short Term Bond ETF (NYSEArca: BSV), which costs 0.11 percent.
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