BlackRock's Lowest-Cost ETFs Devour Almost Half of U.S. Flows

(Bloomberg) -- A whopping 44 percent of all flows into U.S.-listed ETFs this year has gone to four low-cost funds from BlackRock Inc.

At the top is the iShares Core MSCI EAFE ETF, known by its ticker IEFA, which has taken in $13.7 billion since Jan. 1, according to data compiled by Bloomberg. Not far behind is the iShares Core S&P 500 ETF, or IVV, which has swelled by $12.2 billion. The iShares Core MSCI Emerging Markets ETF (IEMG) and the iShares Core U.S. Aggregate Bond ETF (AGG) also make the cut, taking in $5.1 billion and $2.4 billion respectively, the data show.

“Mick Jagger once referred to the Beatles as a four-headed monster because all of the band members were so good it was scary,” said Eric Balchunas, an analyst at Bloomberg Intelligence. “The same can be said for these four funds, which have it all: dirt cheap, liquid and serve up core exposures.”

All in, investors have poured $33.4 billion into the iShares ETFs this year, an appreciable chunk of the $75.3 billion they’ve added to U.S.-listed funds. Together, they cover U.S. stocks, international developed equities, emerging markets and fixed-income at a blended cost of about 0.07 percent a year. They’ve been a hit with financial advisers, who are seeking out cheaper funds to meet new fiduciary duty obligations.

The inspiration behind BlackRock’s Core series, which carry lower fees than the firm’s other ETFs, was Vanguard Group Inc., which back in 2012 was winning the war for inflows with their cheaper funds, according to Bloomberg Intelligence. Now, the rivalry between the two giants is inspiring others -- like State Street Corp. -- to launch their own, low-cost ‘core’ exposures.

“It’s like the ‘core wars,’” said Balchunas. “That’s where the majority of fund flows are likely to go over the next decade,” he said.

--With assistance from Sid Verma

To contact the reporter on this story: Carolina Wilson in New York City at cwilson166@bloomberg.net.

To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, Yakob Peterseil, Eric J. Weiner

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