Exchange traded funds are a key part of BlackRock’s (NYSE:BLK) effort to balance its vaunted institutional business by attracting retail investors — individuals and financial advisors.
BlackRock, the world’s largest investment manager, bought the iShares ETF business from Barclays a couple years ago. ETFs are baskets of securities that trade on exchanges like individual stocks.
As part of a plan to attract more financial advisors and individual investors, the firm is counting on the San Francisco-based iShares unit as BlackRock looks beyond serving large investors such as pensions and endowments, reports Dakin Campbell for Bloomberg.
Michael Latham, chairman of iShares, wants to capitalize on the growing popularity of ETFs and the shift to more passive investing, according to the report.
“Over the next five to 10 years, retail markets will understand the value of mixing passive and active together,” Latham commented. “iShares will be a great way for them to get that exposure.”
Currently, “passive” indexing strategies account for 30% of total assets traded by institutional investors while these ETFs only make up 6% to 8% among retail investors, Latham added.
“Especially among individual investors, the usage and ownership is really low,” said Beth Flynn, vice president of ETF platform management at Schwab, in the article. “As more and more people understand the potential benefits that ETFs can offer them in their portfolio, we’ll see more clients adopting them.”
Scott Burns, head of ETF research at Morningstar, believes BlackRock will have a hard time pulling market share from rivals like Vanguard or Charles Schwab (NYSE:SCHW), which have been cutting prices to attract ETF investors.
Max Chen contributed to this article.