InvestmentsFeb 7 2020

IA delays adding ETFs into its sectors

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IA delays adding ETFs into its sectors

The Investment Association has delayed its plan to include exchange traded funds in its investment sectors due to a higher than anticipated level of demand from providers.

Last year the IA said it would include ETFs in its sectors by the end of the first quarter of 2020, but today the trade body announced it would not meet that target.

FTAdviser understands the delay is because the trade body received applications from more than 500 ETFs for inclusion and was unable to complete the project in time.

The trade body expects more funds to apply and believes the number of ETFs being included will significantly alter the sectors it operates. 

A representative of the IA said: “Our sectors are used by savers, platforms and advisers across the UK. As the retail market continues to evolve, it is important that the sectors are as easy as possible to navigate and retain the ability to help compare like-for-like funds.  Our 2020 work programme is designed to achieve this and facilitate the inclusion of ETFs.”

ETFs have grown in popularity over the past decade. Most, but not all, of these products are passive funds that track an index. 

Last year, the IA invited ETF providers in the UK to apply to join the sectors. This would have meant advisers could compare the performance of passive and active products that invest in the same type of asset, such as North American equities. 

Only physical ETFs, that is those which actually own the underlying assets they are tracking, are eligible for inclusion. 

Synthetic ETFs, which do not own the underlying asset but do offer investors the returns available from the specified market, and not eligible.

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