Moneywise’s Helen Knapman gets the lowdown on iShares from head of iShares UK intermediary sales at BlackRock, Pollyanna Harper.
iShares manages three of Moneywise’s tracker (also known as passive) First 50 Funds for beginner investors. These are iShares 100 UK Equity Fund, iShares Overseas Corporate Bond Tracker Fund, and a new addition for 2018’s list, iShares Physical Gold ETC (exchange traded commodity).
What is iShares?
iShares is BlackRock’s ETF (exchange traded fund) business. We aim to help clients around the world – both institutional [organisations] and individuals – build portfolios.
iShares products fall into two broad categories – index mutual funds and ETFs.
Our first iShares ETF was launched in 2000 in the European market and the first UK ETF was also in 2000. In total, iShares has £1.5 trillion assets under management, over 800 ETF funds globally and 68 index funds in the mutual fund range for UK-based investors.
The iShares 100 UK Equity Fund and the iShares Overseas Corporate Bond Tracker Fund come under index mutual funds, while the iShares Physical Gold ETC is an ETF. Index mutual funds trade once a day and you don’t have access to underlying securities as with ETFs. But for individual investors, these different styles aren’t a huge concern because you won’t be day trading funds.
The other difference is that ETFs and ETCs can go more granular. For example, if you take emerging markets, with an ETF you can narrow it down and choose individual countries to invest in from an emerging markets universe.
How are these passive funds managed?
There’s a joke in the industry that passive managers press a button and then go out for lunch. But BlackRock managers manage these funds in incredible detail on an intra-daily basis.
Again, take emerging markets as an example, there are so many stocks [companies] within the benchmark [that the fund is aiming to track] that we have to take a view on which we can and can’t hold in our tracker funds, taking into account factors such as accessibility and price.
What is iShares’ view on passive versus active investing?
Our stance isn’t about active versus passive as we don’t think they’re mutually exclusive – you can use them interchangeably.
We often find that passive funds can be used as the core for a portfolio based on them being lower cost, and that on the periphery you can use actively managed funds to create outperformance.
In addition, the beauty and flexibility of ETFs is that you could use them for either the core or satellite elements of a portfolio based on your analysis of what they’ll do for you and whether they’ll meet your goals.
How can individual investors access iShares’ funds?
Individual investors need to use stockbrokers to access iShares funds. We’re also looking to partner with other businesses, such as wealth managers and robo-advisers as they help to bridge the advice gap. Currently, 16 million investors can’t afford advice and there are more who don’t want to pay for advice.
What’s your top tip for a beginner investor?
Education is massively important. Know what you’re investing in and do your own research.
Also assess your own situation and establish what your goal is; whether that’s to buy a house, cruise, car or start a family.
Then reassess all of that on an ongoing basis, as your circumstances, investment style and risk profi le may change.