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Is BlackRock-Barclays Good for ETFs?


Is it a good thing or a bad thing for exchange-traded funds that BlackRock has emerged as the buyer for the Barclays PLC’s iShares unit? BlackRock is spending $13.5 billion in cash and stock, which is a considerable sum given the economic environment.

(One of my colleagues was rooting for Bank of New York because “they needed it more.”)

The fact that so many top-tier firms were vying for a piece of the ETF business bodes well for the industry. As BusinessWeek previously noted, it tells the world that BlackRock (and other would-be buyers) see exchange-traded funds as having a very hopeful future. Indeed, ETF guru Jim Wiandt of IndexUniverse says: “This BlackRock deal is big not just for the index/ETF industry, but the financial sector in general. It underscores just how big basis-point-linked passive assets have gotten.”

As a firm, BlackRock has already done a respectable job absorbing Merrill Lynch’s mutual funds. Morningstar gives it above-average scores for its domestic stock, international stock, and municipal bond funds. Wiandt says that, on paper at least, “it’s a marriage made in heaven, with BGI in a dominant position where BlackRock is mostly absent: ETFs and institutional indexed asset management.”

Will BlackRock be a good steward of the ETF business? What do you think?


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