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UK ETF price war heats up with BlackRock FTSE 100 fee cut

Stock MarketsMar 10, 2015 08:02
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© Reuters. UK ETF price war heats up with BlackRock FTSE 100 fee cut

LONDON (Reuters) - BlackRock, the world's largest asset manager, on Tuesday slashed the cost of investing in Britain's oldest FTSE 100 (FTSE) exchange-traded fund, ratcheting up the pressure on rival providers such as Vanguard.

BlackRock said it would now charge 7 pence a year per 100 pounds invested to invest in an ETF that pays out dividend income, down from 40 pence previously, to make it the cheapest such tracker on the market. Both Vanguard and Deutsche Bank (XETRA:DBKGn) charge 9 pence, it said.

The iShares FTSE 100 UCITS ETF (Dist) (ISF) fund was the first to launch on the London Stock Exchange in 2000 and currently holds 3.8 billion pounds ($5.74 billion) of assets under management.

BlackRock, which has more than $1 trillion in AuM globally, said it would also cut to the same level the cost of its FTSE 100 ETF which reinvests dividend income.

ETFs are equity instruments that allow an investor to trade a range of assets, from a basket of stocks to government debt. As the fund value tracks the value of its contents, it is cheaper than an actively managed fund.

"We believe ETFs have an important role to play post the Retail Distribution Review and want to confirm our commitment to our clients in this market," said Fergus Slinger, head of UK sales at iShares.

By introducing RDR in 2012, the British regulator removed an incentive for the country's many independent financial advisors to funnel retail investor cash to commission-paying active funds rather than the cheaper ETFs.

Demand for ETFs has grown since, fuelled by the government's decision last year to increase the amount of money investors can save tax-free, and could get another fillip when new pension investment freedoms go live in April.

($1 = 0.6620 British Pounds)

UK ETF price war heats up with BlackRock FTSE 100 fee cut
 

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