For years, BlackRock Inc. has struggled to profit from an investor preference for actively managed bond funds that has largely eluded the world's largest asset manager. Now Chief Executive Officer Laurence D. Fink is facing a new headache.

BlackRock, the world's biggest provider of exchange-traded funds, is losing market share in the ETF business to Vanguard Group Inc., the company best known for its low-cost index funds. BlackRock's U.S. market share declined by 1.4 percent this year to about 41 percent as of June 30, according to a report by State Street Global Advisors. Vanguard, the third largest ETF manager after No. 2 State Street Corp., had a market share increase of 1.7 percent to 18 percent.

"We are not happy with our market share in the second quarter in U.S. equity ETFs," Fink said in a telephone interview today. "You saw risk off, even in ETFs, you had many flows into what I would call the commoditized ETFs, the large, index products, and Vanguard has taken a lot of the share of those flows in those products."