ETF Price War Intensifies With New Launches

February 13, 2012


BlackRock’s iShares has launched 19 funds so far this year, putting pressure on its rivals with credible products, many of which undercut rival products on price, according to an article in the Financial Times.

The iShares MSCI Global Agricultural Producers Fund (NYSEArca: VEGI) for example, has some of the same top holdings as Van Eck Global’s Market Vectors Agribusiness ETF (NYSEArca: MOO). Price becomes a crucial difference: MOO costs 56 basis points a year, while EGI is only 39 basis points, the report said. Also, VEGI has 147 holdings, compared to MOO’s 47, FT said.

Other recently launched funds that increase price competition include an iShares India ETF, a small-cap Canada ETF, and the iShares MSCI Global Gold Miners Fund (NYSEArca: RING), according to the article.

The impact of price competition may be large. The cheaper Vanguard MSCI Emerging Markets ETF (NYSEArca: VWO) had inflows of $7.8 billion, while its rival, the iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM), saw outflows of $6.8 billion last year, according to the FT report.

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