The change in ownership of the iShares family of ETFs may turn out to be a good or at least neutral thing for investors, but right now there’s room for doubt.
The investment firm BlackRock has kept the iShares brand intact after buying it last year and a recent conversation with the company’s new managing director in Canada, Bill Chinery, suggests there will be some interesting products coming in the months ahead.
But right now, we have a small problem. True, it’s to some extent symbolic. But it speaks to a cardinal benefit of exchange-traded funds, which is transparency.
Recently, BlackRock stopped publishing the management expense ratio for its ETFs on the iShares Canada website. Instead, investors are shown the management fee for iShares ETFs.
Management fees are just one component of the costs that investors pay to own ETFs and mutual funds. There are also operating expenses (administrative and legal costs, for example), and taxes.
We like transparency. I’m a big transparency person. But this just gives us more flexibility. — Bill Chinery, BlackRock managing director
Management expense ratios, usually called MERs, capture all of these costs. They are the standard measure of how much it costs to own a fund of any type, and the mutual fund industry is very good about publishing information about them prominently.
The ETF industry? Not so much. Bank of Montreal and Claymore Investments publish management fee info on their websites. To find out about MERs, you have to look at their semi-annual management reports on fund performance (download them at sedar.com).
The iShares family used to be different. It published the MER, not the management fee, which is to say that it gave investors the definitive measure of how much it cost to own their products. Now, it’s telling investors how much they’ll pay for management of their ETFs, while leaving taxes and operational expenses open-ended.
“We like transparency. I’m a big transparency person,” Mr. Chinery, a onetime actuary who was working for Barclays Global Investors when it was taken over by BlackRock, said in an interview. “But this just gives us more flexibility.”
