PA ANALYSIS: For UK equity exposure, go passive

If fund launches are a guide, investors are asking for a largely passive approach to UK exposure.


But as the rise of tracker products continues unabated, there are also an increasing number of similarities. Unsurprisingly, the index-tracking, passively managed products- and there have been plenty of them recently – are almost exclusively based on the UK.

Since the beginning of this year, structured product launches have been pretty much nothing other than FTSE 100-based propositions, courtesy of bigger players such as Barclays Wealth and Legal & General as well as specialists such as Meteor and Gilliat.

As ETFs and other forms of tracker fund gain market share, the mainstream, multi-asset, long only, open and closed-ended houses who are looking to get a greater presence in the less active fund world – Schroders and JP Morgan are certainly the loudest of these – have designed their initial low-cost offerings around the performance of the FTSE.

In February, JP Morgan Asset Management launched its JPM UK Active Index Plus Fund, with an annual management charge of 0.25% per annum and a TER that will not exceed 0.55%. It is based on the FTSE All-Share Index.

UK share

This was followed a month later by Schroders introducing its UK Core Fund with an annual management charge of 0.35% and a TER capped at 0.4%. Its benchmark is also the FTSE All-Share.

In terms of funds under management – according to the latest IMA figures – the aggregates are still dominated by UK All Companies (£108.4bn) and UK Equity Income (£53.8bn).

However, Global Emerging Markets, Japan and North America are taking a far greater share of the net retail sales, suggesting that the UK share of actively managed money is falling.

At the same time, the IMA showed that net retail sales of all tracker funds in Q1 this year hit a record high of £824m. Meanwhile, net retail sales of all funds fell from the Q4 2010 total of £6bn to £4.7bn in Q1 2011.

Of the 81 tracker funds that contributed to these historic highs on the IMA’s register, 40 track UK indices.

This kind of popularity may be all well and good as indices go up. Whether trackers will retain their popularity in a period of greater equity uncertainty is another matter entirely. For now, however, the conclusion looks fairly straightforward – for UK exposure, investors are going passive.