State Street Global Advisors (SSGA) is attempting to make exchange-traded funds (ETFs) more available to UK pension funds by overcoming a structural issue in how they trade.
ETFs are classified as shares meaning that UK pension schemes in the UK would normally need a direct brokerage account to buy or sell ETFs and a direct custodian account to hold them.
SSGA, one of the world’s largest ETF providers, has launched a suite of ETF sub-funds in its Managed Pension Fund wrapper. The wrapper is a limited liability insurance company.
Mark McNulty, head of UK institutional at SSGA, says: “We see this development as an important and necessary step for small and medium UK pension funds. They can now make long-term investment allocations to a broader range of investment markets, including specialty assets such as emerging market debt and quality income tilted equities.”
SSGA is making eight ETFs available through the wrapper.
The issue of UK pension schemes and ETF investment was raised at Funds Europe’s recent ETF roundtable.
At the roundtable, Neil Morgan, senior advisor at AllenbridgeEpic Advisers, said: “For the vast majority of UK pension schemes, exposure to passive investment is through institutional pooled index funds provided by the key passive managers. There’s really no great appetite at all in the UK institutional space for ETFs – though it may be different for smart beta ETFs.”
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