Will BlackRock, Inc. (NYSE: BLK) Replicate Its 2017 ETF Success This Year?

January 09, 2018, 14:15 pm ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

BlackRock, Inc. (NYSE: BLK) recently reported that its ETF business expanded at the fastest rate in 2017, but the question remains whether the asset manager shall replicate its 2017 success this year. The company’s iShares ETF business recorded $246 billion in new flows last year with much of the growth being attributed to global investors who contributed a whopping $201 billion in new flows.

Article Summary

BlackRock had a stellar 2017 with high ETF inflows.

ETFs are gaining popularity among investors and the trend should continue in 2018.

The asset manager should make its fees more competitive this year.

Here’s the trading report on BLK.

The growing popularity of ETFs among both individual and institutional investors contributed to the 76% gain recorded by BlackRock in its ETF business as compared to 2016. This trend is projected to extend to 2018 as the entire ETF industry is expected to double by 2022 from the current $4.5 billion in total assets.

Many investors are embracing ETFs as a viable alternative investment to traditional funds managed actively by fund managers whose main aim is to beat the market. Most investors are choosing to invest in ETFs that track entire sectors or indices due to the diversification offered by such ETFs.

From a strategic point of view, ETFs are regarded as a safer option to buying individual stocks given that they usually track a basket of stocks or even entire industries. ETFs such as the SPDR S&P 500 ETF Trust (NYSEARCA: SPY) track entire indices giving investors significant exposure to the entire stock market, while minimizing the risk associated with individual stocks.

The company is strategically positioned within the ETF industry as an ETF issuer and generates a significant portion of its revenues in the form of ETF management fees. However, the asset manager has been accused of charging high fees for its ETFs as compared to its biggest competitor Vanguard, which offers much lower fees on its ETFs such as the Vanguard Total Stock Market ETF (NYSEARCA: VTI).  

BlackRock could reap significant benefits from lowering the management fees on its ETFs in order to become more competitive in the market.

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