What should trackers track?

The point about trackers is that they track indices - which is why some people call them index trackers. But what happens if the index you’re tracking is not real but made up by the investment provider ? Proper indices are at the very least based on market capitalisation (they reflect Mr Market and his trading actions) or on a set of key fundamentals. Barclays are pioneering a hybrid approach to tracker or passive investing - they're establishing their own basket or index of shares which they then track. The problem here is that you’re relying on Barclay's judgement of which shares to track:

Are they the right set of shares?

Should they be based on a consistent fundamental criteria and should the relative weighting be base don market cap?

The answer with these products from Barclays is that they've kept it simple - ten banks, equally split - but this all smells of almost active investing - you're paying the investment adviser to make the judgment call not betting on the market. This is particularly acute as the ten shares listed on the note does not include Barclays itself - if you are going to adopt an active approach to picking shares then we think that Barclays itself is probably one of the best investment bets at the moment!

Bottom line-

Is it currently a good investment? Probably.

Is it a good investment idea? We have our doubts.