IG Group, the online trading platform, has partnered with BlackRock, a leading global asset manager and the parent company of iShares, to launch a range of ETF-based portfolios.
IG Group and BlackRock have partnered to release a range of ETF managed portfolios.
Expected to be launched in 2016, UK clients will have the opportunity to choose from a range of ETF managed portfolios constructed by IG Group and based on model portfolios developed by BlackRock.
As the largest provider of CFDs and financial spread betting worldwide, IG Group are broadening their offering through this partnership. “The launch of these ETF portfolios is a natural progression in our commitment to provide our clients with an increasingly comprehensive offering. Portfolios composed of passive instruments, such as ETFs, have the potential to disrupt the investment management industry, challenging the traditional high-fee approach to asset management,” said Ian Peacock, Head of UK and Ireland at IG Group.
He added: “ETFs have become much more mainstream in the UK and Europe, and providing ETF-based portfolios will help to significantly broaden our reach as investor demand for these products continues to grow. As the clear market leader in the ETF market, BlackRock is a natural choice to provide expertise. This initiative will include marketing and educational efforts to raise awareness and understanding of ETFs, and we consider this to be a significant long-term opportunity.”
BlackRock has a solid background in providing professional investors with ETF-portfolios through their “Model Portfolio Solutions” which are constructed using iShares ETFs. This service aims to provide investors with broadly diversified portfolios designed to meet specific client outcomes such as growth, risk and income and leverages BlackRock’s leading asset and risk management capabilities.
Michael Gruener, Co-head of Sales for iShares EMEA at BlackRock, commented: “The global ETF market is currently growing at a rate of 20% per annum and while this growth has traditionally been driven by the use of ETFs as individual building blocks, we are seeing a growing number of integrated ETF-based model portfolios that provide investors with a low cost, transparent, and flexible way to invest. While the availability of ETFs and ETF-based portfolios through platforms is still limited in the UK compared to many other European countries, solutions like the IG Model Portfolios are instrumental to raising awareness and understanding of ETFs within the market.”
ETFs provide the discretionary manager with the building blocks to construct a strategic portfolio which is diversified across, and within, asset classes. They also provide a means to adjust exposures tactically based on the manager’s forecasts. When compared to multi-asset portfolios constructed from actively managed mutual funds, ETF portfolios benefit from the lower fees, increased transparency and daily liquidity of the underlying funds. There is also considerably less risk that the ETF will underperform its benchmark.
The development of ETF managed portfolios is in its infancy in the UK; however there are a number of asset managers who are offering the service to investors. Charles Stanley Pan Asset, SCM Private and Twenty20 Investments are three of the leading providers of discretionary ETF portfolios. Investors can also invest through Nutmeg, an innovative technology-based wealth manager, which provides actively-managed ETF portfolios through their website. There are also a number of start-up financial technology companies with products in the pipeline.