IVV Growth Reflects ‘Core’ Brand’s Success

June 05, 2013

IVV’s rise to become the fourth-biggest U.S. ETF says a lot about the success of iShares’ new ‘Core’ brand of cheap ETFs.

The iShares Core S&P 500 ETF (NYSEArca: IVV) is now the fourth-largest U.S.-listed ETF after net inflows of $212 million in May—and positive market action—pushed it two spots up in the rankings in one month.

The fund, which now has $42.55 billion in total assets, ended April with $41.36 billion, and basically switched places with the iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM). But IVV also surpassed the iShares MSCI EAFE Index Fund (NYSEArca: EFA), which ended both May and April in the No. 5 spot.

What makes this rising trajectory noteworthy is the fact the 13-year-old fund hadn’t been a regular member of the top-asset gatherers list for many years. But it seems to be gathering assets faster since iShares rebranded it a “Core” fund last October, and slashed its price tag some 22 percent to 0.07 percent. That’s $7 per $10,000 invested.

Indeed, since the beginning of October, investors have poured a net of nearly $6 billion into this fund—$2 billion of it came in that very first month alone.

That’s particularly impressive considering that IVV swims in one of the most popular pockets of the ETF industry, namely the U.S. large-cap space, where funds like the SPDR S&P 500 ETF (NYSEArca: SPY)—the long-standing No. 1 ETF in terms of assets—compete. SPY has gathered only a net of $3.5 billion in that same October-to-date period.

The Skinny On ‘Core’

It seems iShares’ decision to launch a series of what it calls “Core” funds, and rebrand some existing strategies to fit under that umbrella of now-10 ETFs, is paying off.

Year-to-date, this family of ETFs that include the likes of the iShares Core Total U.S. Bond Market ETF (NYSEArca: AGG), and the iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG), has attracted a combined net of some $5.75 billion in assets, according to data compiled by IndexUniverse.

In fact, only one of the 10 ETFs—the iShares Core Long-Term U.S. Bond ETF (NYSEArca: ILTB)—has bled assets this year, to the tune of $136 million. And that’s not surprising, given investors’ ongoing aversion to long-dated U.S. government debt in the current environment of already-low rates and nagging concern that the long end of the bond market is in for a nasty correction when rates do start to normalize.

Until the unveiling of the Core brand, iShares had been watching lower-cost competitors such as Vanguard, and even Charles Schwab, slowly and consistently encroach on its years-long market share leadership, and it struggled to defend its first-to-market advantage in many market segments due to higher expense ratios on many ETFs.

The idea to roll out this Core ETF brand initiative in an effort to compete on cost was timely, as investors have grown more aware of the importance of ETF fees.

The move resulted in price cuts of as much as 65 percent on some of its existing ETFs last fall, and the launch of similar-but-cheaper funds—like the developing-markets fund IEMG—in an effort to revitalize its footprint in the market.

IVV is now closing in on the SPDR Gold Trust (NYSEArca: GLD)—the third-largest ETF, with $45.4 billion. GLD has been consistently bleeding assets this year. SPY and the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) currently rank Nos. 1 and 2 on IndexUniverse’s latest “ETF Giants” table.

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