Interactive Investor

Fund trade body to add ETFs to fund sectors in 2021

21st December 2020 10:47

Tom Bailey from interactive investor

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More than 500 ETFs will be added to the fund sectors.

The Investment Association (IA) has announced that it will include ETFs in its sectors from 19 April 2021.  

The investment fund trade body says it will add more than 500 ETFs to its sectors. Once completed, the IA will include more than 4,000 funds spread across 52 sectors.

To accommodate the large number of bond ETFs being added, it has decided to split the IA global bonds sector into 14 new sectors. Had the IA not decided to split up its global bonds sector, the number of funds included would have increased by 50%.

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. It had initially expected around 200 ETFs to join. That number has since risen to around 500.

To be included in the IA’s sectors, an ETF must be a physically replicated ETF, 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.

Jonathan Lipkin, director for policy, strategy and research at the Investment Association, noted: “We continually monitor the fund market to ensure all IA sectors reflect the wide range of products the investment management industry has to offer UK savers. Including ETFs within the IA sectors will help investors more easily find and compare the full range of investment funds available to them.

“As part of the process to include ETFs, we are also reviewing the overall structure of the IA sectors. The division of the global bonds sector from April next year will ensure savers are better able to make like-for-like comparisons when choosing their investments.”

The 14 new global bonds sectors will have four sectors across sovereign debt, three in credit, three mixed bond sectors, three high yield and a specialist bond sector.

The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this data may not be suitable for all investors and, if in doubt, an investor should seek advice from a qualified investment adviser.

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