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Adrian Lowcock, Investment Association

The UK’s Investment Association postpones ETF entry into IA sectors

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The UK’s Investment Association has been overwhelmed with interest from ETF providers, with over 500 funds, keen to be included in the IA sectors, to the extent that the Association has now postponed their entry while they work out how to accommodate the funds in an updated framework.

The UK’s Investment Association has been overwhelmed with interest from ETF providers, with over 500 funds, keen to be included in the IA sectors, to the extent that the Association has now postponed their entry while they work out how to accommodate the funds in an updated framework.

Last May, the IA announced its intention to include ETFs in the IA sectors from the first quarter of 2020. In a statement, the Association says that including all the applicants would bring a much wider range of funds into the sector universe, which is welcome.

“But it will also alter the profile of a number of sectors significantly.  After seeking views from IA members and external stakeholders, the IA has decided to postpone the entry of ETFs into the IA sectors whilst we work to accommodate these funds in an updated framework.”

Miranda Seath, Head of Market Insight at the Investment Association says: “Our sectors are used by savers, platforms and advisers across the UK. As the retail market continues to evolve, it is important that the sectors are as easy as possible to navigate and retain the ability to help compare like-for-like funds. Our 2020 work programme is designed to achieve this and facilitate the inclusion of ETFs.”   
 
In response to this news Adrian Lowcock, head of personal investing at Willis Owen, says: “I think it is very important that this decision is taken with all due consideration. Adding ETFs will materially change some sectors and it will have an impact on performance data for those sectors both historic and going forward. 

“Whilst it is important the IA stay relevant to evolving markets it is also important to understand how investors use the IA data. Adding different product types to the sectors could mean investors are not as able to compare investments on an equal footing.

“Perhaps complimentary IA ETF sectors would work initially. This would enable comparison and also allow for further assessment of the impact it would have on those sectors.”

The IA sectors are used by savers and their advisers to navigate the large universe of funds in the UK. There are over 35 sectors and these are divided into groups of similar funds based on factors such as asset class, overall investment objective and country/region.
 

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