Edinburgh-based pensions, insurance and investment company Aegon UK, part of the Dutch-owned group, has announced its acquisition of Cofunds, a leading UK investment platform, for £140m. Aegon has stated its intention to ‘enhance’ the platform through offering a wider choice of investments, which includes, for the first time, exchange-traded funds (ETFs).
Dominic Clabby, Head of UK retail at Source.
The accession of ETFs is likely to result in greater adoption of ETFs among independent financial advisors (IFAs) who use the platform, many of whom have complained at the lack of access to ETFs.
With £77.5bn of assets on the platform, the introduction of ETFs could provide a significant boost to ETF issuers.
Several ETF providers have commented favourably on the acquisition, stating that platform unwillingness to host ETFs has been a major contributor to the current disparity in activity between institutional and retail markets.
If Cofunds’ competitors, spurred into action by the move, decide to follow suit, this could make significant inroads in closing this gap.
Amanda Rebello, Head of Passive Distribution UK and Ireland at Deutsche Asset Management, said: “Part of the reason for the slower uptake from retail investors has been the gradual reconfiguration of investment platforms to incorporate ETFs. So any change that places ETFs in front of a retail audience we’re obviously in favour of.”
Dominic Clabby, Head of UK retail at Source, added: “The upgraded platform will finally give them [financial advisers] access to hundreds of ETFs and many strategies that aren’t available elsewhere. We hope the few remaining platforms not yet offering ETFs will follow suit.”
FundsNetwork, one of Cofund’s largest competitors, introduced ETFs onto its platform in December 2015, with ETFs from providers such as iShares, Vanguard, HSBC and ETF Securities.
Nizam Hamid, Head of ETF strategy at WisdomTree Europe, said: “As more and more platforms make ETFs available, the access barrier diminishes.”
Another significant barrier to the uptake of ETFs by financial advisers is the need for greater education of the investment vehicle. Several collaborations have been established between ETF providers to tackle this problem.
The acquisition is still awaiting regulatory approval and, following Aegon’s recent purchase of BlackRock’s UK DC platform, would create the UK’s largest fund platform.