iShares Introduced Some New Low-Cost Exchange-Traded Funds

I read yesterday that iShares is introducing some low-cost ETFs (I couldn’t locate the piece I read yesterday so I found something close to what I originally read) to compete with Vanguard. One of the new ETFs is iShares Core MSCI EAFE ETF (IEFA), which will have an expense ratio of 0.14 percent. What’s interesting about this is iShares already has an ETF based on the EAFE (EFA). Why didn’t they just lower the expenses on that ETF instead of creating a whole new ETF? According to one article I read, the new EAFE-based ETF will have a slightly “investable markets” which, according to Barron’s “include a bigger helping of smaller stocks and tend to track more stocks altogether.”

My theory is that iShares simply didn’t want to give existing EFA holders a fee break. It’s much better for iShares to make investors do something (sell EFA and buy IEFA) and incur some costs rather than just lower the fees associated with the EFA.