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Hargreaves’ tracker fund move signals turning tide

Hargreaves’ tracker fund move signals turning tide

Passive investing is now too important to ignore, investment experts have said, after one of the UK’s biggest wealth management companies introduced trackers on its list of recommended funds for the first time.

On 1 September, Hargreaves Lansdown added 13 index-linked tracker funds to its Wealth 150 Plus list, which offers a selection of the company’s favourite funds.

Last year, the FTSE 100 firm was the second largest wealth manager by sales, and some financial figures claim this acceptance of passives on the list could further threaten the active management industry.

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Tony Yarrow, founder of Wise Investments, said: “Clearly, passives are now too important for Hargreaves to ignore.

“This might be a turning point, or I would see it as more of a point in the evolution of markets, rather than the beginning of the end for active managers.”

The manager of the £53m TB Wise Income fund pointed out investors can have a relationship with an active management team which isn’t possible with a passive fund, adding the “novelty factor” of ETFs might wear off.

He also said passive investing is a “momentum strategy” where investors capitalise on market trends. “We have been in a momentum market post-crash, which has suited passives, but there are signs that this may be changing.”

Simon Torry, chartered financial planner at SRC Wealth Management, said the move signals an “inevitable” turning of the tide, adding that Hargreaves Lansdown are only responding to what has been a growing trend across the investment marketplace.

Matthew Harris, IFA and owner of Dalbeath Financial Planning, said the move was interesting, particularly because Hargreaves has been at the forefront of selling the idea that active managers are worth paying high fees for.

He said: “If the Wealth 150 starts to have a passive fund in each asset class then that certainly challenges that view.

Danny Cox, head of communications and chartered financial planner for Hargreaves Lansdown, said: “We have been highlighting tracker funds for a number of years now through our Core Tracker List, the recent change is simply to move these funds onto the Wealth 150 Plus so investors can consider active and passive funds side by side.”

katherine.denham@ft.com