Facebook Vice President David Marcus is the face of the company's Libra digital currency, but the original driving force was a 26-year-old female corporate-development...Technologyread more
Amazon's new policy for account suspensions doesn't go far enough to protect sellers from potentially unfair and wrongful suspensions, merchants say.Technologyread more
There is no end in sight to the Boeing 737 Max grounding after two fatal crashes, prompting airlines to rethink their growth plans.Airlinesread more
After a year of flooding, Midwest farmers face a stifling heat wave that's spreading across the U.S.Weather & Natural Disastersread more
On Saturday, Disney's Marvel Studios announced its upcoming slate of superhero films during a panel at San Diego Comic-Con.Entertainmentread more
Moving lots of data to a public cloud over the internet can take months or years. CNBC got an inside look at how AWS transfers data to the cloud for its clients.Technologyread more
A quarter of the S&P 500 companies report earnings next week, and that could buffet the market as investors await the July Fed meeting.Market Insiderread more
Iran's Revolutionary Guard claims a British tanker it still holds, Stena Impero, failed to follow international maritime rules.World Newsread more
"It troubles me that the most important political office in the world is becoming the face of racism and exclusion," Kaeser said in a Twitter post.Politicsread more
Silver's rally could be losing its shine after the precious metal reached its year-to-date high, futures experts warn.Futures Nowread more
Some 40% of Americans would struggle to come up with even $400 to pay for an emergency expense. Just how are so many Americans so short on cash? Blame debt.Personal Financeread more
"Its traditional active funds have struggled and it recognizes that it is difficult for traditional stock selectors to consistently outperform," said Alex Bryan, director of passive strategies research at investment analysis firm Morningstar. "These changes should help cut costs and allow BlackRock to be more competitive on price."
You may benefit from BlackRock's move even if you aren't a client of the world's largest asset manager. Many industry analysts anticipate other fund companies will follow BlackRock's lead.
"We expect other firms to bring down fees both in response to active BlackRock products coming down in cost but also in acceptance that lower-cost products are being favored by advisors and investors," said Todd Rosenbluth, director of ETF and mutual fund research at CFRA.
BlackRock's change in strategy comes as investors are abandoning actively managed funds at a rapid clip. Active U.S. stock funds held $3.6 trillion in assets while their passive counterparts held nearly $3.1 trillion as of January, according to Morningstar. All classes of passive funds saw $563 billion in new contributions over the past year through January while active funds suffered $325.6 billion in withdrawals.
Index funds have lower fees than their actively managed counterparts. Morningstar found the asset-weighted average expense ratio for passive funds is roughly 0.18 percent compared with 0.78 percent for active funds.
Even hot-hand managers, who best a benchmark in one year, struggle to stay at the top of the heap. Recent research from S&P Dow Jones Indices finds only 5 percent of mutual funds that invest in large U.S. companies and that had a winning three-year record against the S&P 500 continued to beat their benchmark in the three following years. (See table below.)
As self-driving cars may hurt taxi drivers and truckers, automation "just hit asset management people who make a half of million dollars a year," said Laura Varas, founder and CEO of financial research firm Hearts & Wallets. "What BlackRock is doing is huge and there will be more to come."
Financial services firms need to "re-invent what role humans should play," Varas said. Her research into consumer behavior has found that people are comfortable with automated investing services, like robo-advisors, as long as they can talk to a human when they need help.
Some see BlackRock's overhaul as a wake-up call to the rest of the asset management industry.
"It makes good business sense in an industry that often doesn't move fast enough," said Denise Valentine, a senior analyst at financial services research firm Aite Group. "Creating another or Wilshire 5000 fund is not where the money is. "