A one-year checkup of the iShares 'Core' brand reveals a robust lineup of ultra-cheap ETFs.
A year ago today, iShares launched its "Core" series of low-cost ETFs, which involved the launch of four new funds and the repackaging of six existing funds—all in low- or lower-cost wrappers, in an effort to revitalize the firm's ETF lineup amid an increasingly competitive landscape.
Looking back at the past 12 months, and at the glossy television and print media advertising campaign that accompanied the rollout, it seems fair to say that investors have embraced the "Core" concept, and that BlackRock did manage to revitalize the iShares brand.
As IndexUniverse Director of Research Dave Nadig put it back when the "Core" funds debuted a year ago, the move made sense for a company that had been "a bit out of the game" among ETF-focused advisors who have become increasingly aware of costs, and who had been turning more and more to competitively priced offerings from firms like Vanguard and Schwab.
The "Core" lineup is a comprehensive low-cost offering that allows investors to own core equities and fixed-income asset classes. In sum, the rollout seems to have fueled a new wave of iShares asset gathering. Eight of the 10 "Core" ETFs raked in more than $18.15 billion in combined new assets in the past year. That's nearly 3 percent of iShares' total U.S.-listed ETF assets in its more than 250 ETFs.
Together the 10 "Core" ETFs have total assets of almost $100 billion, or nearly 16 percent of iShares' total assets under management of $628 billion, according to data compiled by IndexUniverse.
Flows And Performance
In a broad sense, U.S. equities and international equities "Core" ETFs did well from both an asset-gathering as well as a performance standpoint in the past year, as investors expressed their growing confidence in an improving U.S. economy and upped their risk appetite outside U.S. borders as well.
When it comes to "Core," a trio of U.S. stock ETFs really stood out since the lineup came to market a year ago. At 0.07 percent a year in fees—or $7 per $10,000 invested—the now-$45.84 billion iShares Core S&P 500 ETF (IVV | A-99) was the most popular "Core" ETF, with net creations of $6.0 billion in the past 12 months. The fund was also a star in terms of performance, delivering gains of 18.4 percent in the period.
Similarly, the $20.34 billion iShares Core S&P Mid-Cap ETF (IJH | A-82) and the $12.52 billion iShares Core S&P Small-Cap (IJR | A-89) also raked in sizable assets, to the tune of $5.5 billion and $1.84 billion, respectively, in the same period.
IJR was also the best-performing "Core" ETF, rallying 33 percent in the 12-month period since the lineup was unveiled, followed by IJH's 28 percent gain in the same period. The funds have annual expense ratios of 0.17 percent and 0.15 percent, respectively.
All three of these ETFs already existed before "Core" was introduced, but were repackaged in lower-cost wrappers last October to make them more competitive.
Here's a quick glance at how the "Core" ETFs have done in the past year:
|Fund||Ticker||1-Year Net Flows||AUM||1-Year Returns|
|iShares Core S&P 500||IVV||$6.00B||$45.84B||18.40%|
|iShares Core S&P Mid-Cap||IJH||$5.51B||$20.34B||28%|
|iShares Core S&P Small-Cap||IJR||$1.84B||$12.52B||33%|
|iShares Core S&P Total U.S. Stock Market||ITOT||$388M||$866M||19.50%|
|iShares Core MSCI EAFE||IEFA||$829M||$994M||22.50%|
|iShares Core MSCI Emerging Markets||IEMG||$2.40B||$2.49B||5.70%|
|iShares Core MSCI Total International Stock||IXUS||$83M||$160M||15.50%|
|iShares Core Short-Term U.S. Bond||ISTB||$35M||$59M||0.08%|
|iShares Core Long-Term U.S. Bond||ILTB||-$149M||$36M||-14.3%|
|iShares Core Total U.S. Bond Market||AGG||-$615M||$14.4B||-4.7%|
IEMG Takes Aim At EEM, VWO
On the international equities front, the developed ex-U.S. iShares Core MSCI EAFE ETF (IEFA | A-91), with nearly $1 billion in total assets, stood out in terms of performance, delivering gains of 22.5 percent amid net inflows of $829 million in the year, according to data compiled by IndexUniverse.
IEFA has clearly gathered momentum at a time when investors are upping their exposure to Europe as the region shows signs of growth after a debt crisis that threatened to break up the eurozone.
But it's perhaps the emerging market "Core" ETF that offers the more interesting tale, as its asset-gathering success comes somewhat at the expense—or in addition to—the success of another competing iShares emerging market ETF, the massive $43 billion iShares MSCI Emerging Market ETF (EEM | B-96).
iShares' "Core" lineup indeed added a brand new, me-too fund to the fold that went head-to-head with one of the firm's biggest ETFs, but with a much lower price tag.
Investors poured nearly $2.5 billion into the iShares Core MSCI Emerging Markets ETF (IEMG | B-98), a fund that at 0.18 percent in expense ratio, challenges EEM's 0.69-percent-a-year price tag. The fund also takes aim at the Vanguard FTSE Emerging Market ETF (VWO | B-86)—the largest emerging market fund today and one that also costs 0.18 percent in fees.
In that same 12-month period, EEM also gathered assets—$5 billion worth, in fact—despite IEMG's growing following, and at the expense of VWO's $5 billion net-asset loss in the period.
EEM's asset gain is most likely the result of Vanguard's decision to abandon VWO's MSCI benchmark for a FTSE index that excludes South Korea—a move by Vanguard that, like the "Core" rollout, also became public last October.
It's probably the case that EEM gaining the upper hand over its cheaper Vanguard competitor reflects institutional investors' preference for MSCI, or even investors' feelings toward South Korea's place among emerging markets.
Meanwhile, only two "Core" ETFs bled assets, both of them fixed-income strategies that are linked to longer-dated U.S. bonds—a segment of the market that has been shunned by investors in recent months amid fears of higher interest rates ahead. The longer-dated a bond is, the more sensitive its price is to interest-rate fluctuations.
The $14.91 billion iShares Core Total U.S. Bond Market ETF (AGG | A-97) led in asset outflows, with net redemptions of $650 million in the past year. The fund was also one of the worst-performing ETFs, with losses of 4.7 percent in the period. AGG costs 0.08 percent a year, or $8 per $10,000 invested.
Finally, the $36.5 million iShares Core Long-Term U.S. Bond ETF (ILTB | B-91) also saw net outflows of $149 million in the past year, but ILTB has the distinction of being the worst-performing "Core" ETF in the 12-month period, with losses of 14.3 percent. The fund has an annual expense ratio of 0.12 percent.