Will BlackRock’s iShares Add More in 2018 Due to Popularity?
Lack of alternatives
Since the launch of ETFs, asset managers (XLF) still haven’t come up with low-cost effective investment offerings for investors across asset classes and regions. ETFs have grown into more than a $4 trillion market. BlackRock’s (BLK) iShares has been one of the top beneficiaries and is expected to keep that position in the upcoming quarters. The offerings for iShares, Vanguard, and State Street (STT) make up most of the market inside and outside the United States.
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BlackRock’s iShares raised $52 billion in 3Q17 compared with $74 billion in the prior year. The division’s total assets under management rose to $1.6 trillion. Managed assets under ETF offerings form 27% of BlackRock’s total assets under management. iShares offerings include equity, debt, emerging market debt, and blended products for US and international investors. iShares added $33.1 billion in equities and $17.5 billion in debt-related offerings. Brokers such as Charles Schwab (SCHW) and banks such as JPMorgan Chase (JPM) have also improved their offerings related to ETFs and index funds.
Garnering higher fees
BlackRock’s iShares managed a $69 million rise in base fees to $1.1 billion in 3Q17 compared to 2Q17, reflecting higher fees on new funds and appreciation of holdings. Equity holdings rose $51 billion, reflecting a rise in broad markets and sectors. The appreciation could be moderate in 4Q17 since equities have given up some gains on concerns of high valuations. However, hopes of a tax rate cut to 20% from 35% could result in a further propping up of valuations. Investors might add further to their existing equity holdings due to the windfall gains to corporations and a boost to earnings per share.