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BlackRock Fee Cuts Extend Into Smart Beta Realm

BLK, SMLF, GS, JPM, LRGF, INTF

BlackRock,Inc. (NYSE: BLK), the world's largest asset manager, delivered an early holiday present to investors by unveiling another round of fee reductions on some of its exchange-traded funds. The most recent batch of fee cuts pertain to some iShares smart beta ETFs.

iShares Smart Beta ETF Investors Enjoy Fee Cuts

BlackRock's iShares unit is the world's largest ETF sponsor. The new fee cuts cover six iShares smart beta ETFs.

“BlackRock is lowering fees for the ETFs by as much as 20 basis points, according to Securities and Exchange Commission filings,” according to Bloomberg.

Among the iShares smart beta ETFs with new lower fees are the iShares Edge MSCI Multifactor USA Small-Cap ETF (NYSE: SMLF), iShares Edge MSCI Multifactor USA ETF (NYSE: LRGF) and the iShares Edge MSCI Multifactor Intl ETF (NYSE: INTF).

3 In Focus

INTF, LRGF and SMLF debuted in May 2015 as part of a suite of five multi-factor ETFs from iShares; annual fees at the time of debut ranged from 0.35 percent to 0.6 percent. The ETFs focus on quality, momentum, value and low size in the stock selection process.

Multi-factor exchange-traded funds are an increasingly popular segment of the broader ETF landscape. Perhaps part of the reason why investors are embracing these ETFs is that timing individual investment factors, such as low volatility, momentum and value, is difficult.

Multi-factor ETFs offer investors exposure to several investment factors — the idea being that investors don't need to time when a certain factor will perform well and when others will fall out of favor. Notable issuers, including Goldman Sachs Group Inc (NYSE: GS) GS 0.07 percent, JPMorgan Chase & Co. (NYSE: JPM) JPM 0.58 percent and John Hancock, have brought multi-factor offerings to market.

Success Of Multi-Factor ETFs

As of November 20, smart beta ETFs around the world attracted $45 billion in new assets compared with $30 billion for all of 2015, according to BlackRock.

In May, BlackRock revealed data that showed smart beta ETF assets will reach $1 trillion on a global basis by 2020 and then more than double to $2.4 trillion by 2025. The global ETF industry currently has north of $3 trillion in assets under management.

The fee cuts on the multi-factor ETFs are not the first this year by iShares. In October, the issuer unveiled lower fees for 15 of its 20 iShares core ETFs.