BlackRock lowers fees on US mid- and small-cap style ETFs

Oct 24th, 2020 | By | Category: Equities

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BlackRock has reduced the fees charged on a quartet of ETFs providing exposure to value and growth stocks within the mid-cap and small-cap segments of the US equity market.

BlackRock slashes fees on US mid- and small-cap style ETFs

Current investors in the ETFs will save approximately $15m in annual fees.

Each ETF has seen its expense ratio reduced by seven basis points.

With the funds collectively housing over $21 billion in assets under management, the fee cut equates to annual savings of approximately $15 million for investors at present asset levels.

The $4.6bn iShares S&P Mid-Cap 400 Value ETF (IJJ US) has been cut from 0.25% to 0.18%.

The $7.1bn iShares S&P Mid-Cap 400 Growth ETF (IJK US) has been cut from 0.24% to 0.17%.

The $5.1bn iShares S&P Small-Cap 600 Value ETF (IJS US) has been cut from 0.25% to 0.18%.

And the $4.4bn iShares S&P Small-Cap 600 Growth ETF (IJT US) has also been cut from 0.25% to 0.18%.

The fee cuts place the ETFs on a more competitive level with funds offered by Vanguard that track the same indices and come with expense ratios of 0.15% or 0.16%. Vanguard’s suite houses around $2.3bn in AUM.

Methodology

The funds provide exposure to investment style indices based upon S&P Dow Jones Indices’ flagship US equity size benchmarks – S&P Mid-Cap 400 and S&P Small-Cap 600.

Each constituent in the parent index is ranked according to a value score (based on change in earnings-per-share over current price, book value to price ratio, and sales-per-share growth rate) and, again, according to a growth score (based on earnings to price ratio, share price momentum, and sales to price ratio). The constituents are then ranked a final time based on the ratio of their value ranking to growth ranking.

The highest-ranked firms accounting for 33% of the parent index’s market capitalization are added to the value style index at 100% of their market cap. Similarly, the lowest-ranked firms that account for 33% of the parent index’s market cap are added fully to the growth index.

The companies that sit in the middle of the rankings – so called blended companies – are determined to have neither pure growth nor pure value characteristics and are added to both indices; however, their market capitalization is divided between the growth and value indices in proportion to their distance from the pure style regions.

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