iShares lowers expense ratios on bond ETFs

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CppCoder
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iShares lowers expense ratios on bond ETFs

Post by CppCoder » Sat Jun 16, 2018 7:12 am

Did anyone else notice that BlackRock significantly reduced the expense ratios of some of their bond ETFs effective June 1? Here's an article listing the funds:

http://www.etf.com/sections/features-an ... nopaging=1

Of particular note (to me, anyway) was the reduction in the expense ratio of MUB (iShares National Muni Bond ETF), from 0.25% to 0.07%. As a Fidelity investor, I think this finally gives Fidelity an expense ratio competitive, no commission muni bond option. SUB, the short term muni bond ETF from iShares also reduced its ER from 0.25% to 0.07%.

For the purists, I read the MUB prospectus, and this is a contractual reduction of net ER from 0.25% to 0.07% through May 30, 2023, not a reduction in the gross ER. What will happen in five years, who knows, but at least with a bond fund, most of the gains will be through interest, so there probably wouldn't be a big capital gain if BlackRock reverted to the higher ER and you chose to sell.

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jhfenton
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Re: iShares lowers expense ratios on bond ETFs

Post by jhfenton » Sat Jun 16, 2018 7:24 am

Yes. The reductions were discussed on here a couple of weeks ago. They were some very nice reductions.

I prefer bond mutual funds, so I don't actually own any bond ETFs. But it is nice to have competitive prices if I ever need to hold any bond funds away from Vanguard.

You can thank Vanguard's VTEB (Vanguard Tax-Exempt Bond ETF) in large part for the reduction in MUB. VTEB launched at 9 bp on 08-21-15 following the same index as MUB and has accumulated $3.2B in assets. If you look at the 01-01-17 to 06-01-18 time frame, VTEB took in $2.3B while MUB took in $1.0B (MUB currently has $9.5B in total). Asset flows were definitely starting to tilt in VTEB's favor. Now at 7 bp, MUB should be able to maintain its status as the segment leader.

As you said, I wouldn't worry about the difference between a fee waiver and a fee cut. Since fees can be changed, there is really no difference between the two.

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happysteward
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Re: iShares lowers expense ratios on bond ETFs

Post by happysteward » Sat Jun 16, 2018 7:33 am

Why does TD still quote MUB with a 25 basis point “management fee”?

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"How much money is enough?", John Rockefeller responded, "...just a little bit more." | "He who loves money will not be satisfied with money..." Ecclesiastes 5:10

2pedals
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Re: iShares lowers expense ratios on bond ETFs

Post by 2pedals » Sat Jun 16, 2018 7:56 am

Thanks for sharing.

AlohaJoe
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Re: iShares lowers expense ratios on bond ETFs

Post by AlohaJoe » Sat Jun 16, 2018 8:05 am

happysteward wrote:
Sat Jun 16, 2018 7:33 am
Why does TD still quote MUB with a 25 basis point “management fee”?
From the first post: "For the purists, I read the MUB prospectus, and this is a contractual reduction of net ER from 0.25% to 0.07% through May 30, 2023, not a reduction in the gross ER. "

Or, go to iShares page: https://www.ishares.com/us/products/239 ... i-bond-etf

I suppose you can call TD why they show what is presumably the gross fee rather than the actual net fee.

2pedals
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Re: iShares lowers expense ratios on bond ETFs

Post by 2pedals » Sat Jun 16, 2018 8:08 am

happysteward wrote:
Sat Jun 16, 2018 7:33 am
Why does TD still quote MUB with a 25 basis point “management fee”?

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You need to read the Prospectus, it shows are waiver fee of 0.18% ‌

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happysteward
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Re: iShares lowers expense ratios on bond ETFs

Post by happysteward » Sat Jun 16, 2018 8:10 am

Thanks I see the fee waiver now...

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"How much money is enough?", John Rockefeller responded, "...just a little bit more." | "He who loves money will not be satisfied with money..." Ecclesiastes 5:10

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