Investors of FTSE 100 ETFs benefit as index reaches new 2016 high

Apr 14th, 2016 | By | Category: Equities

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Exchange traded fund investors with exposure to the FTSE 100 index could have benefited from the index rising to 6,362 points yesterday as mining companies and banks propelled the index up 1.5% over the course of the day. Yesterday’s close was the highest point for the index this year and means it has recovered 825 points (14.9%) since its lowest point this year on 11 February. The index is the principal reference for the largest stocks listed in the United Kingdom by market capitalisation and underlies a significant number of investment products such as ETFs.

Investors of FTSE 100 ETFs benefit as index reaches new 2016 high

The FTSE 100 Index is the UK’s premier reference for large-cap equity performance. The index tracks the top 100 firms by market capitalisation listed on the London Stock Exchange.

The largest ETF (by assets under management) tracking the FTSE 100 Index is the iShares Core FTSE 100 UCITS ETF (ISF), with over £3.8bn in AUM. It is also one of the cheapest means of accessing the index after iShares slashed total fees on the fund from 0.40% to 0.07% in 2015.

Laith Khalaf, Senior Analyst, Hargreaves Lansdown, said in a statement: ‘The last two months have seen a turnaround in fortunes for the UK stock market, after a miserable start to the year. Strong performance from oil and mining shares has been the key driver of the rebound in the Footsie, on the back of a recovery in commodity prices.”

Despite momentum building behind the index since the start of April, Khalaf notes that the index’s future performance still contains significant uncertainty: “Looking forward there are still risks out there,” he said. “China is continuing its transformation from a manufacturing-led economy to one focused on the consumer, the UK will shortly be going to the polls to decide whether to remain part of the EU, and central banks in the US and UK will at some point have to start raising interest rates.

“However, the valuation of the UK stock market remains near the middle of its range, which suggests today’s investors are neither picking up a bargain or paying through the nose, instead they are getting close to a fair price.”

Other significant ETFs which reference the FTSE 100 Index include the Vanguard FTSE 100 UCITS ETF (VUKE), which holds over £2.1bn in AUM and has total fees of 0.09%; and the UBS FTSE 100 UCITS ETF (UBO3), holding over £100m in AUM and has a total expense ratio of 0.20%.

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