Morningstar Advisor - August/September 2009 - 22

Investment Briefs Will BlackRock increase fees on these products? It’s highly unlikely given the hypercompetitive ETF landscape. Liquidity does have a downside for ETF providers like iShares. That is, if investors don’t like your fees or your product they can vote with their wallets and easily buy your competition’s fund with a few clicks on their computers. What does the transaction mean for iShares and its leadership in expanding the number of ETFs and their adoption? IShares is the largest sponsor of ETF products, and its dedication to marketing and product development has helped spur the booming acceptance of these products, regardless of provider. I have no reason to believe that BlackRock will not continue to support the growth of iShares and their role in pushing the ETF market forward in terms of development and acceptance. This transaction also brings new opportunities for iShares. BlackRock has a stable of established managers and funds to help iShares develop new actively managed ETFs. BlackRock also has a sizable global salesforce and expertise in marketing to institutions. BlackRock reps marketing iShares products could help increase adoption of ETFs by deep-pocketed money managers, helping to improve the overall asset size and liquidity of ETFs. That’s something that would benefit investors and traders alike because it would help keep spreads tight and eventually lower the overall fees. months,” Bergman says. “But the market rally since March has considerably closed the wide gap between price and fair value that prevailed during 2008 and into early 2009. Consider Buys have grown increasingly scarce.” Digging into the totals provides some useful color on recent valuation developments. Morningstar’s equity analysts report the fair value estimates of 2,080 firms. Since the end of the first quarter, the number of fair value increases has run a bit ahead of the decreases (293 versus 280). In turn, the median increase in fair value estimates was larger than the median decrease. The increases are concentrated among firms that Morningstar has determined to lack an economic moat. The relief in the market in recent months is also evident in no-moat stocks, which saw the largest median percent increase in stock prices in Morningstar’s coverage universe. On balance, the widespread stock-price increases outweighed positive net changes in Morningstar’s fair value estimates, and the Wide-Moat Deals Remain as Value Gap Tightens At the end of the second quarter, the market had come closer to fair value, Morningstar stock analyst Bill Bergman says. “We still see buying opportunities, especially among wide-moat companies. And we’ve been raising our fair value estimates, on balance, in recent Nationwide Investment Services Corporation, member FINRA. In MI Only: Nationwide Investment Svcs. Corporation. Nationwide, Nationwide Financial, the Nationwide framemark and On Your Side are service marks of Nationwide Mutual Insurance Company. 22 Morningstar Advisor August /September 2009 M9199-6_16x4.5.indd 1 PUBLICATION: DO NOT P

Morningstar Advisor - August/September 2009

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