Passive Favourite fund updates


Archived article

Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.

What is the AJ Bell Favourite funds list?

The AJ Bell Favourite funds list is designed to lighten your research load. There are thousands of funds out there – so we’ve narrowed the field by selecting a high-quality shortlist of funds we believe can deliver their objectives over the long term. To make the list, each fund needs to pass our robust, independent selection process.

What have we changed?

We keep our Favourite funds list under constant review to ensure we have the highest conviction in the funds it features. At the same time, we keep an eye open for alternative funds that may have better potential to achieve their objectives or represent better value.

As a result of this work, we’ve recently made some changes to the trackers on our list:


Lyxor Core MSCI World UCITS ETF


HSBC Index Tracker Funds – FTSE All World Index Fund


iShares Physical Gold ETC

Why have we made these changes?

Firstly, keep in mind that when we remove tracker funds from our list, it isn’t necessarily because we see any issues with those products. Our changes aren’t a recommendation to switch, but simply represent what would be our favoured choice for that particular asset class in the marketplace today.

Also, when switching from one product to another, you incur costs in the form of price spreads and dealing charges. So it's important to consider these as part of any decision before changing your current tracker investments.

Removed Lyxor Core MSCI World UCITS ETF, and added HSBC Index Tracker Funds – FTSE All World Index Fund

The Lyxor Core MSCI World UCITS ETF tracks the MSCI World Index – an index of global, developed market stocks. Since we already have another fund on the list tracking that index (Fidelity Investments ICVC – World Index Fund), we felt that removing the Lyxor ETF in favour of the HSBC Index Tracker Funds – FTSE All World Index Fund made sense.

One reason is that the HSBC product has a broader geographic focus, encompassing not only developed markets, but also emerging stock markets, which are becoming a bigger part of global stock markets. HSBC are also one of the largest banking and financial services organisations in the world – giving them the experience and presence to effectively manage a global product that encompasses around 90% of the world’s investable, large and mid-cap markets. The fund carries a current OCF of 0.13%.

Added iShares MSCI World SRI UCITS ETF

We’ve added this ETF to provide a dedicated responsible/sustainable investing option to the Favourite funds list. This fund tracks the MSCI SRI family of indices, which are provided by MSCI ESG, one of the leading providers of ESG research and ratings globally. iShares is the largest provider of ESG funds in the world, and is part of BlackRock, the world's largest investment manager.

This ETF tracks the MSCI World SRI Select Reduced Fossil Fuels Index, which means it selects only the highest scoring stocks according to MSCI’s ESG rating system. It also excludes businesses facing controversies. The ‘Select Reduced Fossil Fuel’ variant adds additional values-based filters, on top of the standard SRI filters, covering conventional oil and gas extraction and stricter criteria on thermal coal extraction, reserves and power generation.

We think this ETF represents a low-cost and efficient way for our investors to invest responsibly – into stocks with only the highest ESG credentials and the lowest controversies, selected from global, developed stock markets. The fund carries a current OCF of 0.20%.

Added iShares Physical Gold ETC

As inflation increases and starts to impact not only day-to-day spending, but also investment returns and portfolios, many investors will be looking for exposure to assets with the potential to maintain the purchasing power of their capital. For many, the asset of choice will be gold. To increase choice for our investors, we have for the first time added a way to invest passively in physical gold bullion.

The iShares Physical Gold ETC aims to provide investors with a total return which reflects the return of the price of gold as measured by the London Bullion Market Association (LBMA) gold price. To achieve this, the fund invests in physical gold bullion, which is stored on behalf of the fund in allocated and segregated vaults.

The iShares Physical Gold ETC only accepts gold that meets the LBMA’s ‘Good Delivery’ rules, meaning the gold the fund holds is of the highest grade. The fund also aims to comply with the LBMA’s Responsible Sourcing Programme – to ensure that 100% of the gold bullion backing the ETC is responsibly sourced (as of 31 March 2021). The fund carries a current OCF of 0.12%.

We hope you find this update useful. Please remember that it falls to you to monitor and manage your own investments and to make any changes you think are necessary. Keep in mind this is information only, and not a personal recommendation to buy or sell any of the funds referenced above.

ajbell_terry_mcgivern's picture
Written by:
Terry McGivern

Terry is Senior Research Analyst at AJ Bell. His career in financial services began in 2005 on the settlements team at a major bank. He later moved to an investment management company and then a leading provider of financial services. In 2010 he took up a proprietary futures trading role at one of the world’s largest independent global commodities brokers. Prior to joining AJ Bell Terry spent five years on the Investment Management Team at a discretionary investment manager in Liverpool, where he was also a member of the Asset Allocation Committee.