Q&A: iShares ETF

A reader asks how expenses are calculated on funds of funds.

 

Q – I would like more information about the iShares Conservative Allocation ETF (NYSE: AOK), which is a fund of funds. Are there MER charges on each fund or only on the entire ETF? – G.L.

 

A – This U.S. based exchange-traded fund invests in a portfolio of 10 other iShares funds. The emphasis is on bonds, which make up about 60% of the portfolio, with 37% of the assets in Treasury issues. Stocks account for 35% of the mix, including some exposure to small-caps and emerging markets. Results have been very dependable with a five-year average annual return of 7.3% to June 30.

Although this is a fund of funds, you pay only a single fee for the whole package. Based on 2013 results, the management expense ratio (MER) is 0.43%. However, BlackRock Fund Advisors, who run the fund, have agreed to waive a portion of the management fee (0.14%) until Nov. 30. That means the current MER is 0.29% but that will increase later this year unless the waiver is extended. – G.P.

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