iShares Gold Takes a Run at GLD Published 7/1/2010 10:20 a.m. EDT In a story of David vs. Goliath, the iShares Comex Gold ETF ( IAU) is challenging the gargantuan SPDR Gold Shares ( GLD), which is the second-largest ETF in the U.S. Fear is permeating the market, and it's impossible to miss the rush to physically backed gold ETFs. BlackRock ( BLK), owner of the iShares family of ETFs, clearly sees the trend as an opportunity. While the forces that shape the ETF industry are becoming more complex with time, first-mover status is still a powerful factor. State Street's ( STT) GLD beat IAU to the market by just two months, launching in November of 2004, and it has remained the dominant fund since. While the two funds offer nearly identical exposure, GLD had $49.2 billion in assets as of May 31, while IAU had just $3.3 billion. Over the last five years, IAU's managers have seemed content to follow in GLD's shadow. As investor fear rises and gold ETFs become more popular, IAU is now ready to go to war. On June 11, BlackRock made its first grab for investor attention, announcing a 10-for-1 split for shareholders after gold hit new highs. By executing a share split, IAU became more affordable. It seemed like BlackRock was attempting to appeal to investors that might be on the fence because of the cost of owning a gold ETF. > > Bull or Bear? Vote in Our Poll Blackrock's second bid for assets came today, as IAU's sponsor's fee was reduced to 25 basis points from 40 bps. The sponsor's fee for GLD is 40 bps. The share split and fee reduction are both aggressive plays to attract assets, and time will tell if they pay off. As of June 29, State Street's fund still had a commanding lead, with GLD having net assets of $52.4 billion and IAU having $3.4 billion. Competition among issuers is good for ETF investors, and I expect to see more aggressive pricing in the months ahead. Gold is a hot commodity for nervous investors, and BlackRock seems sure that fear won't die down anytime soon. Since both GLD and IAU are large, liquid funds, I'd recommend either as a good long-term investment. If you're just scouting out gold ETFs now, it's worth considering IAU, which is now the less expensive fund. If you already own GLD, I don't see a reason to switch yet. At the time of publication, Dion Money Management was long IAU.
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