BlackRock has slashed the fees on two of its largest fixed income ETFs providing exposure to UK government bonds, commonly known as gilts.
The lower fees will result in an annual saving of around £3.4 million for current investors.
The ongoing charges figure (OCF) for the iShares Core UK Gilts UCITS ETF (IGLT LN) has been reduced to 0.07% from 0.20%, while the iShares GBP Index-Linked Gilts UCITS ETF (INXG LN) has been trimmed to 0.10% from 0.25%.
Collectively the funds house around £2.5 billion in assets under management with roughly two-thirds of that found within the ‘Core’ gilt fund.
Based on current AUM, the fee reductions are expected to generate savings for investors of approximately £3.4 million.
The iShares Core UK Gilts UCITS ETF is linked to the FTSE Actuaries UK Conventional Gilts All Stocks Index. The index includes conventional GBP-denominated gilts from across the yield curve. It excludes gilts that are linked to measures of inflation (i.e. index-linked gilts).
The fund is part of BlackRock’s ‘core’ range of low-cost funds designed to act as primary building blocks for investors’ portfolios.
Following the fee reduction, the ETF now matches the cost of the £380m Lyxor FTSE Actuaries UK Gilts UCITS ETF (GILS LN) which tracks the same underlying index.
Investors can, however, find even cheaper access to a diversified gilts portfolio through the Invesco UK Gilts UCITS ETF (GLTP LN) which costs just 0.06%. This fund was launched in March 2019 and has yet to see any significant inflows.
Meanwhile, the iShares GBP Index-Linked Gilts UCITS ETF provides exposure to UK inflation-linked government bonds by tracking the Bloomberg Barclays UK Government Inflation-Linked Bond Index.
Index-linked gilts offer investors protection against unexpected inflation.
Here again Lyxor also offers a more price competitive product in form of the Lyxor Core FTSE Actuaries UK Gilts Inflation-Linked UCITS ETF (GILI LN). With an OCF of just 0.07%, it is the cheapest ETF to compete in this space. The fund has around £40m in AUM.