Bestinvest has suspended its rating on the iShares S&P 500 ETF and is reviewing its passive exposure to US equities after iShares adjusted its prices yesterday.
The exchange-traded fund arm of BlackRock had cut the total expense ratio on the S&P 500 ETF for the accumulating share class to 0.15 per cent but retained the 0.4 per cent fee on the distributing share class.
Ben Seager-Scott, senior research analyst at Bestinvest, said he was “very disappointed that the group has chosen not to address the pricing issues on the highly popular and liquid S&P 500 ETF (distributing share class)”.
Mr Seager-Scott said he had “serious questions over whether this product is still competitive” at a fee of 40 basis points when competitors charged as little as 9 basis points, especially as its previous size and liquidity advantages have been “eroded”.
Mr Seager-Scott said ETFs from Vanguard, HSBC and State Street were widely considered the cheapest in terms of reported charges but he said the review would examine costs not included in total expense ratios, such as the bid-offer spread and internal costs to find the best value provider.
He said he did not accept BlackRock’s claim that it had changed the accumulating class because that was held by long-term investors, while the distributing class was not changed because it was used by short-term investors.
He said: “Rather, we suspect this latest move benefits BlackRock’s own shareholders by protecting a major source of revenue and is not in the best interest of this ETF’s investors.”
A spokesperson for iShares said: “Our aim is to offer investors a wide range of tools to implement their specific needs. By reducing the fees on the accumulating versions of the FTSE 100 and S&P 500 we are giving longer term investors low cost access to key exposures with the service and quality they’ve come to expect from iShares.
“The distribution versions of these exposures remain the funds of choice for investors who place a premium on greater liquidity.”
