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Mutual fund company BlackRock (NYSE:BLK), the world’s largest money manager, announced plans Monday to cut fees on several exchange-traded funds.
According to Reuters, analysts said that fee reductions at BlackRock’s iShares line of ETFs would have less of an impact on market index provider MSCI (NYSE:MSCI) than previously expected. On Tuesday, following the announcement, shares in MSCI rose 6 percent and shares in BlackRock increased approximately 2 percent.
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The Wall Street Journal reports that BlackRock’s decision takes “square aim at rival Vanguard Group Inc., whose ultralow-cost ETFs have eaten into BlackRock’s market share.”
Since the beginning of October, MSCI shares have dropped 30 percent. On October 2, the Vanguard Group, a major client of MSCI, announced that would no longer include MSCI indexes with its 22 largest funds in order to save money. Subsequently, analysts began speculating that BlackRock would do the same.
After the Vanguard lowered the cost of popular funds, Barron’s wrote that the BlackRock was “ripe for fee-cutting.” For BlackRock, the move was necessary to compete with rivals like Vanguard and Charles Schwab (NYSE:SCHW).
The mutual fund company will cut fees on only six of its 600 iShares funds, fewer than analysts had expected. Nevertheless, the fee cuts will result in an annual loss of $35 million to $40 million, Bernstein analyst Luke Montgomery wrote in a report.
MSCI, Reuters reported, was thought by analysts to be immune to from price wars in the $1.5 trillion global exchange-traded fund market until Vanguard dropped the indexes in October.
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