There are more than 3,000 ETFs for advisors and investors to consider including dozens that launched in September alone. It is hard for recent products to get on the radar and gather assets. Last week, BlackRock, the largest global ETF provider, took steps to raise the visibility of two of its recently launched active equity ETFs.
Active Equity ETFs on Sale
In an update to fund regulatory filings, BlackRock said it would be waiving the entire expense ratio for two ETFs for six months. The BlackRock Advantage Large Cap Income ETF (BALI ) and the BlackRock Large Cap Value ETF (BLCV ) will have a 0.00% expense ratio between October 1 and March 2025. After going on sale, BCLV and BALI are expected to return charging 0.46% and 0.35%, respectively in the second quarter.. Both funds launched in 2023.
According to a Blackrock spokesperson in an emailed statement, “These actions reflect BlackRock’s long-term conviction in active ETFs and our ability to use our scale to deliver value and quality to our clients. We are committed to offering our clients choice, convenience, and access to investments that help them meet their financial objectives.”
As of late September, BlackRock managed $30 billion across 42 U.S.-listed active ETFs. Assets have approximately doubled this year with the $12 billion BlackRock US Equity Factor Rotation ETF (DYNF ) and the $5.5 billion BlackRock Flexible Income ETF (BINC ) leading the charge. Both ETFs have benefited from usage in model portfolios. Meanwhile, BCLV and BALI recently had a combined $75 million in assets.
Crypto ETFs Were on Discount in 2024
BlackRock is the latest firm to waive the full ETF fees in 2024. When spot bitcoin ETFs launched in January 2024, many firms waived the entire fee for at least six months. Currently, investors in the VanEck Bitcoin ETF (HODL), a more than $700 million fund, are still paying nothing to own the fund till March 2025. Interestingly BlackRock did not take a similar full waiver approach with its own $23 billion bitcoin ETF. IBIT currently charges 0.22% after waiving part of the fees initially.
Meanwhile, Fidelity and Grayscale are among the firms currently waiving the full fee for their spot ethereum ETFs that launched in June 2024. The $1 billion BlackRock Ethereum ETF (ETHA ) now charges 0.12%, after a partial fee waiver.
In July 2024, Invesco launched two options based ETFs. The actively managed Invesco S&P 500 Equal Weight Income Advantage ETF (RSPA ) and the Invesco QQQ Income Advantage ETF (QQA ) manage $270 million and $130 million, respectively. Investors in these funds are not paying any expenses. Invesco has a full fee waiver in place that expires at the end of 2024. We think the exposure these funds provide is a key reason for the assets.
Why Now?
So why do we think BlackRock is waiving all of the fees for two of its active ETFs now? We believe in the fourth quarter many advisors will be looking to replace active mutual funds with active ETFs. Investors are increasingly embracing active ETFs.
In general, ETFs are more tax efficient than mutual funds and have lower expense ratios. We believe strongly that advisors should go beyond a fund’s fee in their due diligence. They should look at performance records and inside products like BCLV and BALI. However, the full fee waiver could cause the funds to hit the radar of advisors in a crowded active ETF market.
BCLV owns approximately 55 stocks like Cardinal Health, Citigroup, Comcast, and Wells Fargo. Meanwhile, BALI owns approximately 150 stocks, including Apple, Microsoft, Merck, and Nvidia. The fund also sells call options to generate additional income.
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