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Monday, June 15, 2009

Look for ETFs in retirement plans with BlackRock's deal with iShares

Laurence Fink has big plans for exchange-traded funds in the retirement market if he gets his hands on the largest ETF provider.

His firm, BlackRock Inc. (BLK-Quote) , has unveiled a widely expected deal to purchase Barclays Global Investors for $13.5 billion, one of the largest transactions ever in the asset-management business. See coverage of the deal.

Among other things, the Barclays (BCS-Quote) unit is the largest provider of ETFs, with 369 global iShares ETFs and assets of nearly $300 billion at the end of the first quarter.

"I believe with our strength in mutual funds and, importantly, the overwhelming position of iShares, that we can now bring a comprehensive solution to our retail clients, providing both solutions in the mutual-fund space and in the ETF space," Fink, the chief executive officer of BlackRock, said during a conference call Friday to discuss the proposed deal.

"We will continue to expand the iShares platform in different countries," he said.

Fink also said BlackRock could use its weight and influence to get ETFs into more retirement plans, which are dominated by mutual funds. One big hurdle for ETFs is that most 401(k) back offices aren't set up to handle ETFs, which are baskets of securities that trade like individual stocks.

"I think one of the real long-term trends is going to be lower-cost products," Fink said.

"I think the expenses associated with many retirement products overwhelm some of the relative returns," he said. "Some passive strategies will have a larger component to the future of our retirement strategies."

Most of the larger iShares ETFs are index-linked funds tied to recognizable stock and bond benchmarks.

Won't raise iShares ETF fees

Fink on Friday told Fox Business he has no plans to raise expense ratios at BGI's lineup of exchange-traded funds.

"I could say with total clarity they're not going higher," Fink said during an interview with Fox Business. "We're going to keep them where they are or bring them down."

The BlackRock CEO said he expects ETFs to continue their fast rate of growth and that the firm could introduce actively managed ETFs.

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