Issuer Spotlight: iShares

by on May 13, 2013 | ETFs Mentioned:

When State Street introduced its S&P 500 index Fund–the SPDR S&P 500 ETF (SPY, A)–back in 1993, a revolution was sparked. Since then, exchange traded funds have become the go-to fund for both retail and institutional investors. Assets in ETFs continue to grow and there are currently more than 1,400 funds available for investors. Leading the way is issuing firm iShares [see also How To Pick The Right ETF Every Time].

An Industry Veteran

In response to State Street‘s popular SPY, Morgan Stanley, in cooperation with British investment bank Barclays, launched a series of ETFs called WEBSstanding for World Equity Benchmark Shares–that tracked various MSCI foreign stock market indices. Later in 2000, Barclays underwent a new branding effort designed to grow the ETF market. The bank launched over 40 new funds, with extensive education and marketing behind them, and renamed the original WEBS as iShares.

During the financial crisis, as a way to raise much needed capital, Barclays sold the iShares brand–along with its asset managing arm–to mutual fund manager BlackRock for roughly $13.5 billion in cash and stock. Since that time, BlackRock has grown the popular ETF line and is now the single largest issuer of exchange-traded funds.

Quick Statsishares

  • Headquarters: Jersey City, NJ
  • U.S. Listed ETFs: 288
  • Expense Ratio Range: 0.07% – 1.02%
  • Avg. Expense Ratio: 0.41%

As of May 3, 2013

Most Popular iShares ETFs

Based on assets under management, these are the most popular PowerShares ETFs:

  • MSCI Emerging Markets Index (EEM, B+): Tracking emerging markets like China, Russia and Brazil, EEM has quickly grown into one of the largest and most popular ETFs on the market. With nearly $45 billion in assets and an average daily trading volume of 54 million shares, EEM has cemented itself as the way investors of any size garner exposure to emerging market nations [Emerging & Frontier Markets ETFdb Portfolio].
  • MSCI EAFE Index (EFA, A): Tracking 22 different developed market economies from Europe, Australasia and the Far East, EFA is right behind its emerging market twin in terms of assets – currently at $42 billion. Likewise, trading volume is a swift 19 million shares daily.
  • Core S&P 500 ETF (IVV, A-): Recently rebranded under its new core line of ETFs, iShares’ bread-n-butter S&P 500 index fund continues to gather support from investors. Assets in the ETF stand at a staggering $41 billion dollars. Meanwhile, the fund has gained a following among those buying and holding as well as trading. Daily volume is a very respectable 3.8 million shares.

Heaviest Traded iShares ETFs

ETF Volume
iShares MSCI Emerging Markets Index (EEM) 54,529,008
iShares Russell 2000 Index (IWM) 38,771,078
iShares MSCI Japan Index (EWJ) 37,410,070
iShares MSCI EAFE Index (EFA) 19,009,863
iShares FTSE China 25 Index Fund (FXI) 16,799,037

In addition to its broad market funds, iShares continues to be a popular way for investors to gain exposure to Asia’s two largest economies: China and Japan. The FXI has $6.7 billion in assets and is regarded as one of the best ways to gain exposure to the world’s leading emerging market. At the same time, EWJ tracks many of Japan’s export leaders and has remained a favorite way for traders and investors to quickly bet on the direction of the nation’s economy.

Cheapest iShares ETFs

ETF Name Expense Ratio
ITOT iShares Core S&P Total US Stock Market ETF 0.07%
IVV iShares Core S&P 500 ETF 0.07%
AGG iShares Core Total U.S. Bond ETF 0.08%
IBCC iShares 2018 U.S. Investment Grade ETF 0.10%
ILTB iShares Core U.S. Long Term Bond ETF 0.12%

As an industry leader, iShares features some of the lowest expense ratios available for investors. This has been exemplified by its “core” group of ETFs.  Average expense ratios across its platform are 0.41%, with some of its cheapest offerings going for as little as 0.07%  [see also The Cheapest ETF For Every Investment Objective].

Additionally, iShares has partnered with many brokerage account sponsors–such as Fidelity and T.D. Ameritrade–to offer commission-free trading of its funds. This allows regular retail investors the ability to access its ETFs at little to no cost.

Notable Standouts

Several iShares ETFs have been standouts in terms of performance over the long haul. A perfect example is the iShares Nasdaq Biotechnology ETF (IBB, A-). Betting on high-tech drug producers, life science equipment manufacturers and biotech stocks, the fund has generated double digit returns over the last five years, logging in a 32.13% gain in 2012 alone [also see How To Rescue Your Losing ETF Position With Options].

Another prime performer has been the iShares MSCI Thailand (THD, B). As the only pure way to gain exposure to one of Southeast Asia’s fastest growing emerging markets, THD surged an incredible 40.23% in 2012. Finally, as investors have returned to real estate investments in the wake of the Great Recession, iShares FTSE NAREIT Retail ETF (RTL, A-)–which bets on owners of malls, power centers and shopping plazas–has jumped 25% in 2012 alone.

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Disclosure: No positions at time of writing.