Asked about how fee cuts would affect BlackRock's profits, he said it was "not relevant."

Biggest Manager

With $4.4 trillion in total assets among its various product lines, BlackRock remains the world's largest asset manager and is unlikely to be eclipsed by Vanguard anytime soon.
BlackRock has nearly tripled the size of the iShares business since it bought it from Barclay's five years ago, largely by selling to big institutions, such as the Arizona State Retirement System, which plunked down $300 million to seed three iShares funds last year.

It has also won institutional and retail investors abroad: BlackRock has a strong presence in Europe, Asia, Canada and Latin America. Total BlackRock ETF assets outside of the U.S. are about $280.5 billion, about 36 percent of the $700 billion total market.

Analysts say that iShares' size and scale makes the effect of fee cuts in the near-term fairly minimal on the overall business, but that a prolonged price war could hurt the firm.
"It's a tough spot to be in," said Edward Jones analyst Jim Shanahan. "There is some growth potential there, but it is slow to materialize and it has to be powerful enough to offset the addition of a lot of these products with fees less than the current weighted average fee rate."

Vanguard, which unlike BlackRock isn't publicly traded, offers significantly cheaper funds. The average expense ratio of a Vanguard ETF is 0.14 percent, or $14 for every $10,000 invested, compared with the industry average of 0.58 percent. BlackRock's average expense ratio is 0.32 percent.

"When talking about large, commoditized ETFs, low cost makes a big difference, and Vanguard is a little bit more competitive," said Gabelli & Co analyst Macrae Sykes.

"Investors recognize Vanguard as the low-cost leader––whether for index funds, for active funds, for bond funds, for money market funds, or for ETFs," said Vanguard spokesman David Hoffman. "We like to say that we've been lowering the cost and complexity of investing for 38 years. We are also increasingly being recognized for our commitment to providing high-quality products that can play an enduring role in a portfolio."

Marketing To Mom And Pop

The iShares team has been working on building its brand. An "iShares by BlackRock" advertisement now shares the same spot on the New York Times home page as a Vanguard ad that bears its trademark ship. The two alternate in the advertising space next to the markets section.