BlackRock's lowest-cost ETFs win almost half of U.S. inflows

Four iShares Core funds have taken in $33.4 billion so far this year, a big chunk of the $75.3 billion added to U.S.-listed ETFs

Mar 13, 2018 @ 1:33 pm

By Bloomberg News

A whopping 44% of all flows into U.S.-listed ETFs this year has gone to four low-cost funds from BlackRock Inc.

At the top is the iShares Core MSCI EAFE ETF (IEFA), which has taken in $13.7 billion since Jan. 1, according to data compiled by Bloomberg. Not far behind is the iShares Core S&P 500 ETF, or IVV, which has swelled by $12.2 billion. The iShares Core MSCI Emerging Markets ETF (IEMG) and the iShares Core U.S. Aggregate Bond ETF (AGG) also make the cut, taking in $5.1 billion and $2.4 billion respectively, the data show.

(More: International ETFs ready for takeoff)

"Mick Jagger once referred to the Beatles as a four-headed monster because all of the band members were so good it was scary," said Eric Balchunas, an analyst at Bloomberg Intelligence. "The same can be said for these four funds, which have it all: dirt cheap, liquid and serve up core exposures."

All in, investors have poured $33.4 billion into the iShares ETFs this year, an appreciable chunk of the $75.3 billion they've added to U.S.-listed funds. Together, they cover U.S. stocks, international developed equities, emerging markets and fixed-income at a blended cost of about 0.07% a year. They've been a hit with financial advisers, who are seeking out cheaper funds to meet new fiduciary duty obligations.

The inspiration behind BlackRock's Core series, which carry lower fees than the firm's other ETFs, was Vanguard Group Inc., which back in 2012 was winning the war for inflows with its cheaper funds, according to Bloomberg Intelligence. Now, the rivalry between the two giants is inspiring others — like State Street Corp. — to launch their own, low-cost "core" exposures.

"It's like the 'core wars,'" Mr. Balchunas said. "That's where the majority of fund flows are likely to go over the next decade."

(More: ETF alphabet soup obscures market risks)

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