BlackRock Cuts ETF Fees To Defend Its Market Share

BlackRock, Inc. BLK management has been forced to make the tough decision to fork over $0.30 of annual EPS in order to maintain its ETF market share. Wells Fargo has reported that BlackRock cut its fees on its 15 U.S. iShares Core Series ETFs in order to stay competitive in the space.

The 15 ETFs impacted by the move have a combined assets under management (AUM) of around $215 billion. Wells Fargo notes that this is the 10th time Core Series fees have been cut in recent years.

“But, this week’s fee rate cut by far is the most significant in terms of affected AUM and revenue reduction,” Wells Fargo added.

Related Link: Inside BlackRock's ETF Fee Cuts

The fee cut will shaved off about 1.3 percent from the Wells Fargo's 2017 EPS projections for BlackRock.

Following the cut, Wells Fargo is calling for 2017 EPS of $22.40. The firm’s valuation range for BlackRock of $340-370 is based on a 16x earnings multiple.

Despite the earnings hit, Wells Fargo concludes that maintaining market share, especially for a company with as many scale advantages as BlackRock, should be the top priority.

So far in 2016, BlackRock shares are up 4.7 percent, lagging the S&P 500’s 5.7 percent gain.