ETFs -Our Preferred Choice
As well as considering the level of diversification an investment offers, iFunds has to consider other factors, such as the costs involved in making that investment. With lower internal charges and no stamp duty to pay ETFs are more cost efficient than unit trusts or OEICs*.
The rationale is simple: the higher the costs involved the lower the returns to our client. When choosing collectives many asset managers use actively managed unit trusts or OEICs to achieve the desired diversification. They will do this in the belief that active fund managers add value over time thus outweighing the consideration of the higher charges associated with these type of funds. However, at iFunds we believe that vehicles called Exchange Traded Funds (ETFs) are more suitable instruments and we will endeavour to use these in the majority of circumstances.
The other reasons for this approach are as follows:
- Transparency: We are able to identify the underlying constituents of an ETF at all times whereas a unit trust/OEIC fund manager can change the constituents of his portfolio at any time. The ability to identify the underlying constituents is central to the iFunds investment process and we believe this process will lead to out -performance over time.
- Flexible dealing: ETFs offer us the ability to deal on an exchange at any time. Unit Trusts/OEICs are bought and sold through the managers at fixed periods during the day. This means that iFunds managers can respond to major events as they happen rather than waiting for the window offered by the unit trust or OEIC.
- Performance: The traditional ‘fund of fund manager’ may focus on selecting unit trusts or OEICs on the basis of their analysis of the underlying fund managers potential to add value. The iFunds process leads us to focus on market timing to deliver performance.
