Price war looms after BlackRock slashes fees to offer cheapest fund on the market

Michael Bow
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BlackRock founder and boss Larry Fink (right) leads the group
The battle to invest savers’ cash ramped up yesterday after fund giant BlackRock slashed fees on their most popular funds by 50 per cent, giving it the cheapest fund on the open market.

The company, which manages $4.7 trillion for investors, said it would cut fees on its UK equity FTSE tracker fund to 0.07 per cent.

Rival fund manager Legal & General Investment Management currently charges 0.10 per cent on its rival product, although it can be found cheaper through other fund platforms.

Tracker funds, or so-called passive funds, track the ups and downs of the FTSE 100’s biggest companies. They are cheaper to run than actively managed funds because they do not require a manager to decide where to invest.

Around 12 per cent of UK funds under management are run in passive investment funds.

BlackRock’s £8.1bn 100 UK equity tracker fund will cut fees from 0.16 per cent to 0.07 per cent while its US and European tracker funds will see a similar reduction.

The biggest players in the passive market, BlackRock, Legal & General, HSBC, Fidelity and Vanguard, have been battling to cut prices on flagship funds in a bid to lure more customers through the door.

“We could see further price cuts,” Hargreaves Lansdown’s head of passive investments Adam Laird said. “Although at this level there’s not much further to go.”

BlackRock’s decision to cut fees on its FTSE 100 ETF fund earlier this year cost the company £13m in revenue, Laird said, although this may have been offset by the higher inflows of cash flowing into other products. Prior to regulatory changes in 2013 the cheapest passive funds had fees of around 0.25 per cent.

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