If you find the range of index funds aimed at UK investors about as appealing as snacks on a train’s buffet trolley, then take a look at the BlackRock family of trackers known as the BlackRock Collective Investment Funds [1] (CIF).
Nestling within this series of index-hugging Unit Trusts is:
- A highly competitive emerging markets fund.
- The first property index fund for UK passive investors [2].
- Some dirt cheap total expense ratios [3] (TERs) that are not all they seem.
The best picks from this Blackrock range offer a useful alternative to the tasty TER troika of Vanguard [4], HSBC, [5] and L&G [6]. They also offer the prospect of fee-dodging salvation [7]for some Hargreaves Lansdown investors.
Until their adoption by the major fund platforms [8], coherent information on the BlackRock CIF index funds was shrouded in financial fog.
And there are still plenty of wisps obscuring the view even now.
Glimpses of ludicrously cheap TERs on MorningStar [9] dissolve into the ether on the discount broker sites, while BlackRock’s homepage reveals nary a trace of these fabled funds… Just what exactly is going on?
[10]
The family BlackRock
Here’s the full rundown of index funds available from the BlackRock CIF range:
| Fund name | Class A TER | Class D TER |
| Continental European Equity Tracker | 0.58% | 0.23% |
| Corporate Bond 1-10 Year | 0.47% | 0.22% |
| Corporate Bond Tracker | 0.47% | 0.22% |
| Emerging Markets Equity Tracker | 0.6% | 0.24% |
| Global Property Securities Equity Tracker | 0.61% | 0.24% |
| Japan Equity Tracker | 0.57% | 0.23% |
| North American Equity Tracker | 0.57% | 0.21% |
| Overseas Corporate Bond Tracker | 0.52% | 0.22% |
| Overseas Government Bond Tracker | 0.52% | 0.22% |
| Pacific ex Japan Equity Tracker | 0.59% | 0.24% |
| UK Equity Tracker | 0.57% | 0.21% |
| UK Gilts All Stocks Tracker | 0.46% | 0.21% |
Note: Stated TERs for the Class A funds can vary by platform.
The funds appear in two guises: Class A and D.
Obviously – given the lower TERs – Class D is the good stuff, but sadly it’s reserved for institutional investors. i.e. Pension fund type financial behemoths. However, it’s possible to join in the party, if you know where to look. More below.
Financial fleas like you and me are normally offered Class A. As ever in the world of finance, the less you can afford something, the more you have to pay for it.
Other points of intrigue:
- Published TERs are all over the place for the Class A funds. I’ve never seen such swings – anything up to 0.28% – and almost every platform plus MorningStar and BlackRock seems to have its own ‘exclusive’ number. The funds are relatively new and the TERs are still settling down, so ask for the latest information before you invest.
- You can shave 0.2% off the Class A TERs – see the Cavendish Online trick below.
- There’s an initial charge of 5%. But there’s no need to pay it as any decent online platform will discount it to zero.
- Only the UK gilts fund distributes income. The other funds offer accumulation units [11] only.
- As the funds are newish, the performance data is short-term and fund sizes are pretty small. That’s hardly an issue that’s unique to BlackRock but it’s worth checking during your research.
- There’s a spread [12]to pay every time you trade. BlackRock have published spread estimates on page 10 of the simplified prospectus [13].
- ISA eligibility is patchy – it depends on the platform.
Let’s make this interesting… the Cavendish Online trick
Yes, sorry. Where this does really get interesting (and you have to take your thrills where you can in this game) is:
Discount brokers Cavendish Online [14] will rebate 100% of their trail commission on all BlackRock funds!
I’ve not seen any platform rebate trail commission on index funds before, and it means you can knock 0.2% off the TER of every Class A BlackRock fund you buy through Cavendish.
If you react to trading fees like Dracula to sunlight, then the rebate makes the Class A emerging market fund and the corporate bond funds well worth a second look.
The other funds are either unavailable through Cavendish, or else can all be beaten by Britain’s cheapest tracker alternatives [15] – at least for now.
It’s also worth checking if your preferred platform is refunding any BlackRock commission along the Cavendish model.
Let’s make this interesting… emerging markets
The BlackRock Emerging Market Equity Tracker Fund is a good option for investors who can’t afford Vanguard or ETF trading fees [16].
Its published TER of 0.6% trounces its nearest competitor – the 0.99% of the L&G Global Emerging Markets Index Fund [17] – even when you take into account the spread.
It can even beat the Vanguard Emerging Markets Stock Index Fund, if you buy through Cavendish Online and pay an effective TER of 0.4%.
Research is crucial with this fund, however. Its benchmark is the FTSE All World Emerging index (same as the L&G fund) but BlackRock’s interim report shows that the fund has a 20% allocation to North America.
What gives?
As it turns out, the North American allocation is chock full of emerging market companies that are listed in the US.
Performance-wise it’s not wildly out of sync with its L&G equivalent, but you need to be comfortable with what you’re getting into.
Let’s make this interesting… global property
The BlackRock Global Property Securities Equity Tracker is the only property index fund available in the UK.
It invests in developed world commercial property, with a massive bias towards the US.
The TER of 0.61% plus spread compares well with the equivalent iShares ETF – IWDP – (on which you’ll incur trading fees [18]) although HSBC have recently launched a global property ETF – HPRD – with a TER of 0.4%.
Cavendish doesn’t list the property tracker online (a fair few brokers seem to skip this one) but it’s worth a phone call. The fund is new enough that websites may well still be playing catch up with the latest developments.
Class D – out there somewhere?
The holy grail when it comes to BlackRock index funds would be to somehow masquerade as a pension fund and access those juicy Class D TERs.
Many platforms do list the Class D funds but the £250,000 minimum investment is a hurdle I personally find hard to clear.
However, as reader Gadgetmind reveals in the comments below, most Class D BlackRock funds can be bought by mere mortals, if you’re prepared to use the Skandia fund supermarket.
Skandia normally requires investors to use an IFA go-between, but a few discount brokers such as Clubfinance [19] enable you to go it alone.
Here’s the SP:
- Initial charge: 0
- Annual charge: £68.50
- Minimum investment: £2500 lump sum or £99 monthly contribution.
Clubfinance take trail commission from BlackRock but so does every other platform, so don’t worry about that.
Using the Skandia/discount broker combo, the Class D TERs become super-competitive, but only if your portfolio and contributions are large enough to reduce the annual charge and bid-offer spreads to atoms.
Even then the differences are marginal in comparison to the equivalent HSBC and Vanguard funds. Again, it’s the property and emerging market funds where the gain is most impressive.
Want to know more?
BlackRock jealously guards its CIF Investment Fund secrets on its intermediaries’ site [20]. Admit to being an enthusiastic amateur and you’ll never find what ye seek:
- Factsheets [21]
One day the financial services industry will work out how to make things easy for UK investors and empower more people to take charge of their finances. In the meantime, I’m hanging up my deerstalker for another week but hopefully I’ve clued you in to some useful index tracker ideas.
Take it steady,
The Accumulator