Industry Updates

BlackRock declines to extend IVV ETF fee cut to Australians

David Tuckwell

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BlackRock has declined to extend its new ETF fee cuts to Australians.

Last week, BlackRock cut the fees on its three core US share market ETFs – known by their tickers IVV, IJH and IJR. The funds follow popular US share market gauges of large, medium and small companies. They are three of the largest funds in the world.

But BlackRock' fee cuts will be unavailable to Australians who buy into the three funds via the Australian Securities Exchange.

BlackRock bears additional costs by listing ETFs in Australia - especially exchange and share registry fees. Meaning the ASX-listed versions of IVV, IJH and IJR have marginally higher costs.

TickerFund NameUS FeeAustralian feeIVViShares Core S&P 500 ETF0.03%0.04%IJHiShares Core S&P Mid-cap ETF0.05%0.07%IJRiShares Core S&P Small-cap ETF0.06%0.07%

The decision to lower IVV’s fee appears to almost entirely owe to price pressure from Vanguard -- both the Australian counterexample and the inflow data, which measures what ETFs investors are buying, suggest.

iShares cuts Australian bond ETF fees

This year, Vanguard’s S&P 500 tracker – VOO – has taken in a lot more money than IVV -- for the first time ever. VOO's hoovering up follows hot on the heels with Vanguard's decision to underprice BlackRock. Vanguard cut the fee on VOO to 0.03% down from 0.04% early last year.

VOO is now the most purchased ETF in the US

TickerFund NameNet Flows YTD ($M)FeeVOOVanguard S&P 500 ETF22,039.790.03%GLDSPDR Gold Trust15,293.310.40%LQDiShares iBoxx USD Investment Grade Corporate Bond ETF15,149.830.15%QQQInvesco QQQ Trust12,124.220.20%VTIVanguard Total Stock Market ETF11,227.960.03%

Source: FactSet

In Australia, no cheaper S&P 500 tracking alternative to IVV is available.

Incredible fee sensitivity

The triumph of VOO this year owes to US investors and their incredible sensitivity to S&P 500 fees. In the cut-throat ETF price war, US investors have decided they care more about S&P 500 fees than other ETF fees.

Can BlackRock match Vanguard's fee cuts?

To cite two examples: QQQ, the Invesco Nasdaq 100 tracker, has a fee of 0.20%, yet continues to see huge inflows despite the availability of cheaper Nasdaq trackers. Similarly, GLD, the World Gold Council’s gold ETF, which trades under State Street’s brand name, charges a 0.40%. Yet there are several far cheaper alternatives available.

What’s more, it seems, no matter how low core S&P 500-style ETF fees go, they somehow continue creeping lower. Charles Schwab introduced SCHX on a 0.03% fee. JP Morgan then undercut them on a 0.02% fee. BNY Mellon then undercut them both on a 0.00% fee – offering free US large cap exposure.

TickerFund NameNet Flows YTD ($M)AUM ($B)VOOVanguard S&P 500 ETF22,039.79149IVViShares Core S&P 500 ETF3,489.82196SPYSPDR S&P 500 ETF Trust-21,910.94279

Source: FactSet

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Update: This article was updated to include the additional costs of running ETFs in Australia.

Disclosure: The author owns units of IVV.

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