Over 500 ETFs added to Investment Association fund sectors

In total, 530 new ETFs will be added to the trade body’s 52 fund sectors. 

The Investment Association (IA) has added more than 500 new exchange-traded funds (ETFs) to its fund sectors today (19 April).

In total, 530 new ETFs will be added to the trade body’s 52 fund sectors. The inclusion of these ETFs will bring the total number of constituents within the sectors to 4,100.

The ETFs included come from a total of 11 ETF providers, including Amundi, BlackRock, Fidelity International, First Trust, Franklin Templeton, HSBC Asset Management, JP Morgan Asset Management, Legal & General Investment Management, Lyxor, Vanguard and XTrackers.

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The ETFs will be added to sectors alongside actively managed open-ended fund equivalents. The IA says that the inclusion of these ETFs will allow investors to more easily compare the performance of active funds to ETFs.

The decision to add ETFs to its sectors was first announced by the IA in May 2019. At the time, the trade body called on ETF providers to apply for membership. In December 2020, the trade body announced that over 500 ETFs would be added on 19 April.

To be included in the IA’s sectors, an ETF must be physically replicated, meaning that the ETF in question must hold the assets it is tracking. Synthetic ETFs, which attempt to produce the return of an index through swap agreements with counterparties - often banks - will not be included.

The inclusion of ETFs in the IA sectors has led to several sector changes to accommodate the ETFs. For example, the Global Bonds sector will be split into 14 new sectors. If the IA had kept the sectors as they are, the Global Bond Sector would have increased in size by 50%.

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Jonathan Lipkin, director for policy, strategy and research at the IA, noted: “ETFs are a rapidly growing part of the UK fund market. Their inclusion in the IA sector framework recognises this, helping savers and their advisers to make comparisons and choose funds to meet their long-term financial goals.”

BlackRock, Europe’s largest ETF provider under its iShares brand, welcomed the move. Joe Parkin, head of banks and digital channels in the UK at BlackRock, commented: “The inclusion of ETFs in the Investment Association’s sectors reflects the increasingly important role that indexing is playing in the UK wealth market.

“The ability to make like-for-like comparisons between the full range of investment funds available in the UK will be a huge benefit for retail investors and advisers as they [seek] to select appropriate products for their investment objectives.”