MSCI wins new iShares business on lower index fees

Oct 17th, 2012 | By | Category: ETF and Index News

The decision by iShares to license MSCI indices for an important new series of ETFs will no doubt come as a huge relief for MSCI following the news earlier this month that it was being dropped by Vanguard. [Vanguard abandons MSCI on 22 ETFs in favour of FTSE and Chicago Booth’s CRSP].

MSCI wins new iShares business on lower index fees

Indices from MSCI’s ACWI IMI family have been selected to underpin the international equity component of BlackRock’s new iShares Core Series of exchange-traded funds.

Three indices from its ACWI IMI family have been selected to underpin the international equity component of BlackRock’s new iShares Core Series of exchange-traded funds (ETFs).

For the uninitiated, ACWI stands for All Country World Index; EAFE stands for Europe, Australasia and Far East; and IMI stands for Investable Market Index. The iShares Core Series is a suite of low-cost ETFs designed to meet the needs of long-term, buy-and-hold investors. [BlackRock counters Vanguard, Schwab and SSgA with low-cost iShares Core ETFs].

The selected indices are the MSCI ACWI IMI ex US, the MSCI EAFE IMI and the MSCI Emerging Markets IMI. The funds they are set to underlie are the iShares Core MSCI Total International Stock ETF (IXUS), the iShares Core MSCI EAFE ETF (IEFA) and the iShares Core MSCI Emerging Markets ETF (IEMG), respectively.

The MSCI ACWI IMI family captures large, mid and small cap representation across 24 developed markets and 21 emerging markets countries. The index is comprehensive, targeting coverage of approximately 99% of the global equity investment opportunity set, with a strong emphasis on liquidity, investability and replicability.

Baer Pettit, Managing Director and Head of MSCI’s Index Business, said: “We are delighted that iShares has chosen MSCI indices as the basis for this exciting new series of ETFs. The licensing of these indices will enable iShares to further broaden its product offering beyond ETFs based on our standard family of indices. We look forward to continuing to work with iShares in the future.”

Mark Wiedman, Managing Director and Global Head of iShares, said: “All three iShares Core international equity ETFs track segments of the flagship MSCI ACWI IMI, providing investors access to some of the broadest exposure available in the global equity universe today.”

He added: “MSCI is the predominant choice of professional investors and we’re pleased to deepen our relationship with them through the introduction of these new products using their indexes to help deliver high quality portfolio construction to all investors small and large.”

One downside for MSCI is that the licensing fees the company will collect will be lower than its current blended average licensing fee with iShares. But, given the rock-bottom fees iShares is charging on these new ETFs, this comes as no surprise and merely reflects economic reality.

On the upside, as things stand, the fees on all of iShares’ existing MSCI-based ETFs remain unchanged.

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