As investors continue to seek lower fees for exchange traded funds, BlackRock saw an influx into one of their ETFs — but seemingly at the expense of one of their other higher-fee funds, according to Bloomberg.
How the Funds Differ and Why Investors Switch
The $2.2 billion iShares Broad USD Investment Grade Corporate Bond ETF (USIG) saw a record inflow of $624 million, the publication writes. Bloomberg data suggests that a single buyer executed four large block trades in the ETF, with the largest worth $267.5 million. This has resulted in an increase in USIG’s market capitalization of more than 40%, Bloomberg writes.
However, BlackRock's $34 billion iShares iBoxx Investment Grade Corporate Bond ETF (LQD) had $675 million pulled out on just one day at the end of September, followed by a further $320 the following day, according to the publication. In total, there has been an outflow of $3.1 billion from LQD this year, the publication writes.
Athanasios Psarofagis, an analyst at Bloomberg Intelligence, says that seeing this shift between iShares core ETFs is not uncommon, and it is likely that someone is simply “shifting to the cheaper option,” says Psarofagis, according to the publication. And, with LQD charging $15 for every $1,000 invested compared to USIG’s $6, there is a very marked difference in cost, Bloomberg writes.
Both of these BlackRock ETFs track indexes made up of investment-grade corporate bonds, but they have different exposures, according to the publication. USIG has a bigger position with notes issued by gas and oil producers, whereas LQD has larger holdings in U.S. debt, especially banks, Blooomberg writes. And both USIG and LQD are down this year — 4.3% and 5.4% respectively — which is unsurprising considering investment-grade corporate bonds overall have lost around 2.3% in 2018, according to the publication.
