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BGI ETF adds to IFA toolkit



Exchange-traded fund

Growth by tracking the FTSE 250 Index

Minimum investment:
Subject to negotiation with stockbroker

Investment split:
100% tracking the FTSE 250 Index

Place of registration:

Isa link:

Pep transfers:

Annual 0.4%


Tel: 020 7668 8007

Barclays Global Investors&#39 FTSE 250 fund is an exchange traded fund which tracks the FTSE 250 index.

Michael Philips proprietor Michael Both thinks exchange-traded funds (ETFs) are useful tools for IFAs to use when working with clients, especially if the purpose is to add weight to a particular sector and the quality of the managers with funds in that sector is unproven or inadequate. He says: “Once one appreciates what the point is of an ETF is, namely to quickly and cheaply replicate the weighting of a specific market sector, this is an ideal way of achieving that aim. There are far too many investment houses which promote their funds as being actively managed, with a nominated index as their benchmark, when in reality they simply track that index and pocked unjustifiable fees.”

In Both&#39s view, ETFs make no such pretence and give the investor what they promise. He feels the market is very liquid, so investors can easily adjust the size of their holding. He says: “This fund can be held within the better fund supermarkets such as Transact, so dealing costs can be very low. There is no stamp duty payable on the purchase of an ETF, although there may have been some on the underlying shares which Barclays Global Investors holds for the construction of the ETF. This is a further cost advantage compared with an investment trust or Oeic. Unlike an investment trust, there is typically no significant discount or premium to net asset value. The yield will mirror the underlying index, which is disclosed in the key features document.”

There is nothing Both dislikes about this fund as he believes it does its job perfectly. Considering which products will provide competition, Both mentions four UK-based funds that target the FTSE 250 sector from HSBC, Govett Threadneedle and Schroders. He says he would advise clients to hold the ETF in preference to all these funds except the Schroders fund. He explains: “Schroder&#39s mid 250 fund is that rare beast, an active fund which actually adds value so I would not class that as a direct competitor.”


Suitability to market: Good
Investment strategy: Good
Charges: Good

Overall 10/10


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