Shares in asset manager BlackRock (BLK) dived yesterday after rival Vanguard revealed its largest fee cut in its 50-year history.
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BlackRock stock was down nearly 6% after rival Vanguard reduced fees on nearly half of its U.S. funds by an average of 20%. The stock regained some ground in pre-market trading today – up 0.5% – as its shareholders continued to fret about what the Vanguard move could do to BlackRock revenues and demand.
Will BlackRock follow ‘Game-Changing’ Move?
Vanguard said the fee reductions – which some analysts referred to as “game-changing” – are expected to save investors more than $350 million this year alone and was part of its long-running strategy of “limiting the cost of investing.” It fits in well with the trend of more investors looking to low-cost investing options such as passive ETFs, which track an index or industry sector.
The question, both for the industry and for BlackRock investors, is whether it will follow suit and cut its own fees to remain competitive. This could herald a race to the bottom on fees – good news for investors but perhaps not so welcome to BlackRock shareholders.
Or, conversely, BlackRock could see an opportunity to create a quality or service gap between itself and Vanguard. That may mean marketing itself going forward as an asset manager more focused on providing a continued wide range of products than being the cheapest.
BlackRock Remains Asset Leader
BlackRock remains in a strong position with $11.6 trillion of assets under management compared with around $10.4 trillion at Vanguard. BlackRock is also a dividend stock returning $4.7 billion back to shareholders in 2024. This strength is reflected in its 12-month share price performance, which has seen the stock climb 32.53%.
Is BLK a Good Stock to Buy?
On TipRanks, BLK has a Strong Buy consensus based on 13 Buy and 2 Hold ratings. Its highest price target is $1,275. BLK stock’s consensus price target is $1,181 implying an 16.47% upside.
