AJ Bell makes six changes to its Favourite Funds list

Investment platform AJ Bell has made a number of changes to the passive selection on its Favourite Funds list. The changes were made considering factors such as the investment approach, the ability to track the chosen index successfully, the liquidity profile of the fund and cost.

The changes to the AJ Bell Favourite Funds list are:

Both the iShares Core MSCI World ETF and iShares Global High Yield Corporate Bond ETF have been replaced with ETFs that bring cost savings for investors. Lyxor Core MSCI World ETF with an OCF of 0.12% significantly undercuts the 0.20% OCF charged by iShares Core MSCI World ETF, and similarly BMO Barclays Global High Yield Bond ETF with an OCF of 0.35% compares well against iShares Global High Yield Corporate Bond ETF’s 0.50% OCF.

The choice for Index-linked gilts has been simplified with the removal of the iShares £ Index-Linked Gilts ETF due to the similarities with the existing Vanguard UK Inflation-linked Gilt Index fund which has a 0.1% lower OCF.

The addition of the Vanguard USD Emerging Market Government Bond ETF provides new coverage of the emerging market bond category on the list.

The AJ Bell Favourite Funds list was established in April 2017 to help DIY investors narrow down the fund universe and select funds for their portfolios. The list includes both active and passive funds which are reviewed on an ongoing basis.

Ryan Hughes, head of active portfolios at AJ Bell, comments:

“The Favourite Funds tool aims to make investment selection simpler, so by removing assets with similar strategies whilst providing plenty of choice we hope to make it easy for investors to find suitable holdings for their portfolio. 

“The iShares MSCI World ETF has been the preferred global equity ETF for a considerable period and has amassed nearly £13bn in assets, however, competition is hotting up with Lyxor bringing in low cost ETFs, helping deliver cost savings for customers.

“The high yield category has up until this point used iShares but in 2015 BMO launched a global high yield ETF that is hedged to GBP for 0.35% per annum. This strategy has been steadily gaining traction and has grown in scale to a point when we are now happy to add it to the Favourite funds list with the added bonus of being 0.15% cheaper than iShares.

“In order to provide additional depth on the list and provide a passive choice alongside actively managed strategies, we decided to add an emerging market debt passive strategy to the list.  We have selected the Vanguard USD Emerging Market Government Bond ETF which offers a high quality solution for investors wanting emerging market debt exposure for a cost of 0.25% per annum.”