Exchange traded funds: the City’s best kept secret.

secret(UK ETF NEWS) If you believed the hype you would believe that exchange traded-funds (ETFs) had become the investment choice of private investors.

But while overseas investors, particularly in the US, have embraced this cheap and flexible way of investing, private investors on these shores have been more reluctant to join in, accounting for fewer than 10pc of ETF trades.

Deborah Fuhr, the head of ETF research at Barclays Global Investors, blames lack of remuneration for financial advisers for the difference. “In the US a decade ago, sales were low because advisers expected a rebate or commission, but that has changed. Once American advisers started using them they realised how useful they could be for their clients. Now 40pc of ETF trades in the US are made by private investors.”

Yet the British could be missing a trick because many professionals reckon EFTs add to an investor’s armoury.

Justin Urquhart-Stewart of Seven Investment Management said he could build a fully balanced and diversified portfolio using only ETFs. “They have great flexibility – and if they are good enough for Warren Buffett they should be enough for you or me.”

Adrian Lowcock of Bestinvest, the financial adviser, said: “We use ETFs as they are a cheap and effective way to track a market and can provide a core holding to a sector with other satellite holdings being used to add value to a portfolio.”

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