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Hector McNeil, HANetf

UK investment managers’ association to consider including ETFs in fund sectors

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The Investment Association, the association representing investment managers in the UK, has opened a consultation on including ETFs in the IA fund sectors.

The association explains that its 37 fund sectors are designed to enable savers and their advisers to easily compare open ended funds by dividing them into groups of similar funds based on factors such as asset class, investment strategy and geographical region. 

Under the IA’s proposal, over 200 ETFs would be eligible to apply to be included within the existing sectors. Consistent with the current approach, only ETFs that are either UK domiciled, or are EU UCITs with HMRC reporting fund status would be included. 

Commenting on the decision to launch the consultation, Galina Dimitrova, Director of Investment and Capital Markets at the IA says: “We are continually monitoring the fund market to ensure that the IA sectors reflect the wide range of products the asset management industry has to offer savers. The primary purpose of the IA sectors is to serve the needs of consumers and their advisers and the addition of ETFs must be done in their best interests.” 

The consultation will close on 1 February 2019 and respondents are invited to comment on the potential benefits and drawbacks of including ETFs in the IA sectors, as well as the best means for their inclusion.

Commenting on the announcement, Hector McNeil (pictured), co-CEO of HANetf, says: “We think this consultation from the IA shows a great deal of foresight and we welcome the move. The fact is most investors have a variety of both active and passive strategies in their portfolios, including ETFs, and by including them in comparison tables it will enable investors to gain a better understanding of how their portfolios are performing.

“Improving transparency in this way can surely only be a good thing for end investors, and we hope the scope of ETFs included can also be widened over time.

“The next generation of ETFs, such as thematic, smart beta and eventually active products, will sit very well in this initiative. These new ETFs will be much more focused on after fee performance rather than just being judged on how low the fees are, so to have them alongside active funds makes a lot of sense.”

Adam Laird, head of ETF strategy, Northern Europe for Lyxor, says: “The IA’s consultation acknowledges that ETFs are an important part of the investment world – and need to be included in their classification. ETFs are funds and should be categorised alongside.

“Inclusion should be positive for investors too. The sectors are relied upon by investors for comparing funds, for searching on platforms and for verifying that a fund does what they expect. Choosing the right ETF is just as important as choosing the right fund.”

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