iShares Lowers Fees On Most of Its International ETFs

Barclays Global Investors [BGI] is lowering fees on many of its international exchange-traded funds, according to a new prospectus filed at the Securities and Exchange Commission [SEC] before the 1st. The new prospectus deals exclusively with the MSCI-linked international funds.

BGI spokeswoman Christine Hudacko said that as asset counts rose on the funds, Barclays was able to pass down economy-of-scale savings to shareholders. The truth is closer to “has to” – Barclays' management agreement for many of its funds calls for a direct relationship between fees and assets levels, with fees falling as different fund families reach new milestone asset counts. Still, a fee reduction is a fee reduction, and Barclays should be congratulated for doing the right thing for shareholders.

Curiously, the fee on the hugely popular iShares MSCI Emerging Markets Fund (EEM) remains stuck at 75 basis points. That fund is not bound by the asset-linked fee reductions that impacts the other products, so despite posting some of the highest asset growth of any fund on the market in 2006, the 75 basis point expense ratio [ER] is staying right where it is.

Many thought that BGI would reduce the fee on EEM after Vanguard altered its MSCI Emerging Markets ETF (VWO) to be essentially identical to the fast-growing BGI product. VWO charges just 30 basis points for the same exposure.

Outside of EEM and the even more popular iShares MSCI EAFE ETF (EFA), most of the MSCI-linked funds are dropping their official fee by four basis points. Billions of dollars in assets time four basis points equals … a lot of money.

The new and old published fees are:

Comments

[DavidJackson]

Very interesting; shows that the explosion in ETFs is leading to downward price pressure.

[Tom B]

I'm liking ETF's; diversification is looking better to me right now than most particular stocks.

[DavidJackson]

I wonder whether iShares was pressured by WisdomTree. Look at what Luciano SIracusano said here (etf.seekingalpha.com/a...):

<blockquote>&quo... question of expense ratios and ETFs is really very interesting, as I think it captures how the ETF industry has been evolving. When BGI, State Street and Vanguard launched their domestic ETFs tracking traditional cap-weighted indexes, their expense ratios for domestic ETFs were really quite low – reinforcing one of the great strengths of ETFs. These were liquid, transparent, low-cost ways to own large segments of the market in a single fund that trades on a stock exchange like a stock. Over the past few years, new ETFs have emerged – ones that tracked indexes based on less transparent indexes, what some have called “black box” selection and weighting strategies. These ETFs have generally carried higher expense ratios and track more narrowly focused areas of the market. Some contain special bells and whistles. WisdomTree bucked this trend by creating ETFs that cover broad segments of both domestic and international markets, that are based on transparent, fundamentally-weighted indexes, and that we believe are priced competitively: 28 to 38 basis points domestically, and 48 to 58 basis points internationally."...

I'm surprised that WSDT is down only 1.3% today given this news...