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iShares, the exchange-traded funds arm of BlackRock, has unveiled an initiative that will enable UK pension funds and other institutional investors to access ETFs directly through their custodians for the first time.
The initiative makes it easier for institutional investors to buy and sell ETFs without the need for a separate brokerage account.
UK pension schemes and other institutional investors have typically held their investments via pooled funds and discretionary segregated portfolios. However, with the growing interest in passive solutions, many trustees and their advisers are exploring the role of ETFs to access global markets in a liquid, transparent and cost-effective manner.
A small number of the UK’s largest institutional investors, commonly those authorised and regulated by the FCA with an in-house team, use brokerage accounts to access listed securities, including ETFs. These are held for portfolio rebalancing, tactical exposure, hedging and liquidity management.
As non-regulated schemes cannot buy directly held stocks and shares, the vast majority of schemes have not required brokerage accounts, meaning ETF access has proved challenging – until now. iShares has worked with global custody banks including BNY Mellon, State Street, HSBC and JP Morgan to simplify the ETF purchase process so that schemes can now buy and sell ETFs directly through their custodian. The resulting trades are then settled and held within the client’s custody account in a simple and streamlined transaction process.
Commenting on the initiative, Mark Johnson, Head of iShares UK, said: “By simplifying the investment process, the major custodians are helping their UK clients to access one of the most dynamic areas of the market. Investors globally are using ETFs as an efficient way to implement their views, and today’s initiative brings that same opportunity to thousands of pensions schemes in the UK.”
Ian Gass, Chief Executive Officer, BNY Mellon Capital Markets, EMEA, added: “The market for ETFs in the UK and Europe is growing fast, and BNY Mellon recognises its responsibility to work closely with issuers and investors to develop solutions that simplify the process of investing in and servicing these funds. By helping more clients to get easier access to additional products, we will help develop the market and through our dedicated ETF trading desk and market leading ETF fund administration business, we’ve brought together our expertise in order management, trading and settlement to produce a seamless end-to-end service that will benefit UK institutions and most importantly, the beneficiaries.”