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Adviser Fund Index

The rise of exchange-traded funds is one of the biggest product stories of the past decade. Demand for low-cost stockmarket exposure and access to alternatives pushed global ETF assets from less than $100bn in 2000 to in excess of $1tn in 2009, according to BlackRock. Product choice has also expanded rapidly and investors are able to allocate across equities, bonds and commodities via more than 2,000 ETFs.

European-listed funds account for about one-fifth of assets and two-fifths of ETF products worldwide. But despite their growing popularity, some UK investors say they need to learn more about the funds before using them.

A Morningstar survey published this month found that the majority of respondents who do not use ETFs cite a lack of information on such products as a key reason for their caution. Almost 80 per cent of individual investors say they would prefer to learn more about ETFs before investing but the more surprising statistic is that two-thirds of professional investors give the same response.

City Asset Management chief investment officer and Adviser Fund Index panellist Hilary Coghill believes advisers have access to enough information but that ETF investing is research-intensive.

He says: “You have really got to do your homework on understanding what the ETF is investing in and maybe that is where some of the education needs to be done. There are seminars and information around but it does require quite a lot of work.”

Coghill says ETFs require so much analysis that City Asset Management appointed Emma Bilson, a trainee graduate, to cover the sector last year. Bilson looked at the impact of tax complications that came to light earlier this year, for example, when it emerged that investors in ETFs without ’reporting’ or ’distributor’ status were liable to pay income tax at 50 per cent, rather than capital gains tax.

City Asset Management uses ETFs for short-term, strategic allocations to equity markets, alongside ETF Securities physical gold. The fund is designed to offer investors a return equivalent to movements in the gold spot price, minus fees, and is one of the biggest of its kind.

Coghill says: “It is collateralised with gold in HSBC vaults, so if it all goes pear-shaped you can go and get your bit of gold.”

Dennehy Weller managing director and AFI panellist Brian Dennehy use iShares products for exposure to American Treasuries and dollars, plus equity income in the UK, continental Europe and Asia.

Dennehy expects ETFs to win over sceptical advisers. He says: “ETFs prove how you can add value by being able to act faster, using more focused asset classes and at a lower cost. These are all vital in the macro-environment we are in and which we will stay in for a number of years.”


Swing out sectors

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Swiss firm buys HNW adviser

Swiss asset management firm Helvetia Wealth has bought Scottish independent adviser Dunedin Independent. Dunedin launched in 1994 and specialises in providing bespoke investment management to high-net-worth inves-tors across the UK. It has £350m of funds under management and about 30 employees. Dunedin chairman and majority shareholder Mark Emlick will step down while managing director Yuill […]


Governor of Bank of England will be ‘too big to fail’

The office of the Governor of the Bank of England will be “too big to fail” once the current regulatory changes come into play, according to Lord Myners. The Government is proposing to break up the Financial Services Authority and replace it with the Consumer Protection and Markets Authority and the Prudential Regulatory Authority. The […]


Tony Vine-Lott

The director general of the Tax Incentivised Savings Association has come from a structural engineering background and is now building a structured argument at Tisa on tax issues over the RDR, child trust funds and pensions Interview by Gregor Watt


Britain's “Forgotten Army”: The collapse in self-employed pension membership – and what to do about it

Pension scheme membership among employees has risen by more than five million in the past four years because of the policy of automatic enrolment into workplace pensions. But Britain’s army of 4.4 million self-employed people, who account for one in seven of the workforce, are not covered by automatic enrolment. Pension coverage among the self-employed […]


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