7IM switches out of £110m of ETFs

Seven Investment Management has sold out of approximately £110m of exchange-traded funds (ETFs) in the past few months in a bid to keep its expenses down.

Peter Sleep, senior investment manager, said the team had replaced the ETFs with futures across its fund ranges.

The manager said the sales had been largely focused on Eurostoxx and S&P 500 ETFs – and he expected they would shave approximately 0.2-0.3 percentage points off the funds’ total expense ratios (TER).

“This is something that is new for us and we have taken a couple of years to set up operations to trade futures,” he said. “Essentially we have the same exposure but it is cheaper.”

Mr Sleep said he recently took part in a survey by the Edhec Risk Institute, which asked 174 investment managers and private wealth managers about the role of ETFs in asset allocation and their expected use of the securities.

The survey found that 63 per cent were planning on increasing their use of ETFs and only 1 per cent of investors planning a decrease. “I completed the survey on behalf of 7IM and can say that I responded that we planned to decrease our ETF usage,” Mr Sleep said.

“I am not sure we are the only one (rounded up) or one of two that responded that we planned to reduce our ETF usage.”

At the end of May, Mr Sleep said the group put £30m into an emerging market product run by French house Tobam and also provided seed money for an Asia Pacific offering. These were placed in the group’s passively managed AAP fund range.

The manager said these products seek to remove the traditional way in which indices are weighted towards individual constituents on the basis of their market capitalisation.

In its active multi-manager range, Mr Sleep said the group invested £33m into products from Dimensional in April as well as seeding a US deep value product from fund manager Pzena at the end of May with £38m.