The Investment Association (IA) has launched a consultation into whether ETFs should be included in its sectors.
Under the proposals, ETFs that are either UK domiciled or are EU UCITS with UK reporting status and have physical replication will be eligible to be included in the sectors.
This means over 200 ETFs will be available, however ETNs or ETCs that have different structures and are subject to different regulations will be not be included.
The IA has asked asset managers from across the industry to respond by 1 February 2019 and listed a number of potential outcomes to this; "no change to the status quo", "inclusion of ETFs in existing sectors", "creation of separate ETF sectors" or "ability to filter data for inclusion/exclusion of ETFs".
The paper highlighted a number of potential impacts on the sectors such as the high volume of funds entering the different sectors in one day and the change in quartile rankings on existing funds.
For example, in the IA Europe Inc UK sector, some funds could move by up to 7% and others down 8% depending on performance, however the IA said it "does not envisage disruption to the utility of the sectors themselves".
Galina Dimitrova, director of investment and capital markets at the IA commented: "We are continually monitoring the fund market to ensure that the IA sectors reflect the wide range of products the asset management industry has to offer savers.
"The primary purpose of the IA sectors is to serve the needs of consumers and their advisers and the addition of ETFs must be done in their best interests."
Adam Laird, head of ETF strategy for Northern Europe at Lyxor and chairman of the IA's ETF committee, said this was a "game-changing" moment for the ETF industry as it enables investors to access products more easily.
"The IA has previously not included ETFs in sectors and they had been treated like traditional equities or investment trusts so this is an acknowledgment that they are funds," Laird said.
"It shows ETFs are being used in the same way as traditional funds and bringing them into the sectors is going to make it easier for investors to find ETFs."
The decision to launch the consultation comes after the IA formed an ETF committee in August 2017 comprising of key players such as BlackRock, Vanguard and Lyxor.
Earlier this week, Investment Week revealed the IA was launching a consultation on the classification of environmental and social governance funds (ESG).
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