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BlackRock bests Vanguard in FE passive ratings

BlackRock has beaten its rival Vanguard with the most top ratings in the latest FE rebalance of passive funds, which also shows UK Gilt funds are the best-rated sector.

The US giant earned 19 top rated funds followed by Vanguard with 12.

FE portfolio manager Oliver Clarke-Williams says the ratings, which are based on tracking difference, tracking error and fund size, should be part of proper due diligence on passives.

Clarke-Williams says: “More people are investing in passive funds and are increasingly choosing passive exposure to global markets. Therefore, more due diligence is needed to match that accorded to active funds.”

Previously unrated funds that have been awarded a top rating

  • UBS ETF – MSCI World UCITS ETF (Global Equities)
  • iShares Core MSCI World UCITS ETF (Global Equities)
  • iShares MSCI World UCITS ETF (Global Equities)
  • Vanguard Global Stock Index (Global Equities)
  • iShares Developed World Index (Global Equities)
  • iShares Edge MSCI World Minimum Volatility UCITS ETF (Global Equities)
  • Lyxor UCITS ETF MSCI World (Global Equities)
  • DB X-Trackers MSCI USA Index UCITS ETF (North American Equities)

Over half of UK Gilt funds achieved the top rating compared to none in the Sterling Corporate Bond and Property sectors.

Clarke-Williams says this is largely because they are highly liquid and easy to replicate, whereas global equities require purchasing a large amount of stocks from every region in the world.

“It is clear that not all trackers are equal and some markets are significantly more difficult to replicate than others.”

In total, 268 passive funds were rated in the bi-annual rebalance, which analyses funds over three years. There are 40 more funds in the analysis than last year, although commodities, smart beta, leveraged and reverse funds are excluded.

Percentages of top-rated funds in each sector

Sector

5 Passive Crowns

Total Number of Funds

%

UK Gilts

7

13

54%

North American Equities

13

46

28%

Index-Linked Gilts

1

4

25%

UK Equities

14

61

23%

Emerging Market Equities

5

22

23%

Global Equities

7

40

18%

Japanese Equities

4

23

17%

European Equities

6

43

14%

Property

0

10

0%

Sterling Corporate Bonds

0

6

0%

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Vanguard refund 100% of tghe security lebding profits back to the fund and the fund holder. This can have effect of wiping out the already low annual fee. Any idea what Balckrock do wit that ‘extra’ profit here? Would be surprised if they did likewise. After all, Vanguard are a $4 trillion mutual without sharteholders to appease.

  2. Not sure this is quite as simple as the article makes out. I know FE couldn’t rate the Vanguard US fund as buying the index (S&P Total Market) to assess it was too expensive. Hence it has N/A against the passive crown rating. Both are good passive fund providers though and competition has forced all to up their game.

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