Trade body the Investment Association will include exchange traded funds in its sectors.
The ETFs will be placed within the existing IA sectors, which will enable comparison between open ended funds by dividing them into groups of similar funds based on factors such as asset class, investment strategy and geographical region.
Investors and their advisers will be able to compare ETFs against the 3,500 funds already in the IA’s 37 fund sectors from the first quarter of next year.
IA invites formal applications from ETF providers for their funds to be classified into the sectors. According to the IA’s figures, over 200 ETFs are eligible to apply.
Consistent with the current approach, only ETFs that are either UK domiciled, or are EU UCITs with HM Revenue and Customs reporting fund status will be included.
IA director of investment and capital markets Galina Dimitrova says: “We want to ensure that the IA sectors reflect the full range of products the asset management industry has to offer savers around the world. ETFs are a growing part of this market and their inclusion in the sectors will enable consumers to compare across a wider variety of products.”
Morningstar Europe director of passive strategies and sustainability research Hortense Bioy comments: “The IA decision to include ETFs in its sectors makes perfect sense. ETFs are just vehicles and investors are increasingly becoming vehicle-agnostic; looking to select best-of-breed approaches to portfolio construction irrespective of whether they are a fund or an ETF. Investors are simply looking to select the type of vehicle that best meets their needs.”
Blackrock iShares UK head of sales Joe Parkin says: “ETFs have become a core part of portfolio construction and a ‘must-have’ tool for investors. We welcome the IA’s decision to include ETFs within its sector classifications, acknowledging the increasingly important role that ETFs now play within the UK investment industry.”