An Investors Chronicle reader has asked about the relative merits of exchange traded funds (ETFs) versus tracker funds, and wants to know whether one is better than the other when it comes to bond exposure. The reader highlights BlackRock Index Linked Gilt Tracker (GB00B83RVT96) and iShares £ Index-Linked Gilts UCITS ETF GBP (INXG) as an example of two comparable products.
Paul Taylor, chief executive officer of independent financial adviser McCarthy Taylor, says that in some ways comparing trackers and ETFs is "like comparing cats with dogs", but cost, asset class, trading frequency and fund complexity are among the reasons why you might want to choose one over the other.
The first step when choosing any passive fund is to look at the index it tracks. If both products track the same asset class in the same way by physically holding the underlying assets, then one key differentiator might be the ongoing charge.