Vanguard poised to top BlackRock in first-quarter U.S. ETF flows

Vanguard poised to top BlackRock in first-quarter U.S. ETF flows
Vanguard's exchange-traded funds have taken in $17 billion so far this year, while BlackRock has gathered $14 billion.
MAR 27, 2019
By  Bloomberg

Vanguard Group Inc. is luring more money this quarter than any of its rivals in the ultra-competitive U.S. market for exchange-traded funds. The $5 trillion asset manager's U.S. ETFs have absorbed about $17 billion since year-end, meaning it's poised to exceed other issuers for the period, including BlackRock Inc., data compiled by Bloomberg show. BlackRock is in second place with about $14 billion in U.S. iShares net flows as of March 25, setting up a shift between the two behemoths in the final days of the quarter that hasn't occurred since 2016, the data show. The duo, which control 65% of the $3.8 trillion U.S. ETF industry, are locked in a brutal competition for investment in their ETFs. BlackRock, the world's largest issuer of the products, has almost $1.5 trillion of assets in its U.S. iShares ETFs. Vanguard is a formidable runner-up, with about $958 billion. "This is still a largely two-horse-dominant race in terms of assets," said Todd Rosenbluth, director of ETF research at CFRA. https://cdn-res.keymedia.com/investmentnews/uploads/assets/graphics src="/wp-content/uploads2019/03/CI119157327.PNG"

Global flows

BlackRock's net intake so far this quarter was hurt by a $6.9 billion outflow from its iShares Core S&P 500 ETF on Jan. 25, data compiled by Bloomberg show. Large equity ETFs often see outflows early in the year as advisers seek to minimize client tax bills, according to an analysis from Bloomberg Intelligence. The asset manager has led U.S. inflows in both February and March. BlackRock spokesman Ed Sweeney said that iShares gathered more than $28 billion globally in net inflows through March 22. "iShares has consistently led the market in some of the fastest growing segments, including fixed-income, sustainable and factors ETFs," Mr. Sweeney said. The majority of Vanguard's ETF flows are concentrated in the U.S. "Advisers have long gravitated to Vanguard's ETFs for their low cost, tight tracking and brand appeal," Freddy Martino, a spokesman for Vanguard, said in a statement.

Fees resonate

Vanguard said it would cut fees on three of its most popular products earlier this month, just days after it trimmed the cost of another 10 funds. Its S&P 500-focused ETF is now the cheapest in the U.S., while a bond fund is the lowest-cost fixed-income strategy. Cost cutting seems to resonate with investors. A record 97% of net flows into passive funds in 2018 went to products that charged $2 or less for every $1,000 invested. That's prompted some issuers to waive fees altogether this year. But generating revenue from increasingly cheap ETFs has become a growing challenge. Both BlackRock and Vanguard have in recent years unveiled new funds focused on environmental, social and governance criteria, as well as factors — products that typically charge higher fees. The appetite for lower costs could ultimately boost Vanguard even more going forward. Driven in part by its willingness to slash fees, Vanguard is likely to surpass BlackRock as the world's largest asset manager within 10 years, or sooner in the case of a dramatic stock market rout, according to Bloomberg Intelligence analyst Eric Balchunas. (More: Bots are forging the next generation of index funds)

Latest News

Finra's Reg BI Enforcement: Is it 'ineffective, costly'?
Finra's Reg BI Enforcement: Is it 'ineffective, costly'?

The industry watchdog's own reports reflect failures to deter "willful" and "repeat" violations, raising a crucial question about the future of regulation.

SEC prepares to back away from defending climate rule in court
SEC prepares to back away from defending climate rule in court

Acting Chairman Mark Uyeda directed SEC staff to initiate a pause in court while the commission awaits a quorum. The SEC may decide to withdraw from defending itself in a lawsuit over last year's climate disclosure rule.

wealth.com welcomes Kathy Wunderli in private wealth push
wealth.com welcomes Kathy Wunderli in private wealth push

The top estate planning platform's veteran hire will lead its legal team's efforts to develop estate planning, tax analysis, and wealth transfer solutions for ultra-high-net-worth clients.

Morgan Stanley loses $843,000 investor claim stemming from 'gold bar' scam
Morgan Stanley loses $843,000 investor claim stemming from 'gold bar' scam

“If Morgan Stanley had called my client’s son, this wouldn’t have happened,” the investor's attorney said.

LPL welcomes $630M sibling advisor duo from Corebridge
LPL welcomes $630M sibling advisor duo from Corebridge

Meanwhile, Ameriprise has bolstered its own ranks as an LPL defector joins its branch channel in California.

SPONSORED Taylor Matthews on what's behind Farther's rapid growth

From 'no clients' to reshaping wealth management, Farther blends tech and trust to deliver family-office experience at scale.

SPONSORED Why wealth advisors should care about the future of federal tax policy

Blue Vault features expert strategies to harness for maximum client advantage.