L&G wants absolute return sector axed

Legal & General Investments managing director Simon Ellis (pictured) has called for the absolute return sector to be abolished and for funds to be distributed into other IMA sectors.

The Investment Management Association is currently reviewing the absolute return sector classification. The review is expected to conclude by the third quarter of this year.

Ellis says the simplest and best option to aid investor clarity is for the sector to be scrapped. He says: ” If they are single-asset absolute return funds, just put them into the sector they correspond to, so if it is a European absolute return, put it in the corresponding Europe sector.

“Investors will have a clearer idea what field of investments funds participate in. We would start to get more differentiation between funds in the single-asset sectors if absolute return funds were included.”

L&G Investments renamed its multi-asset diversified absolute return trust as the global macro themes fund and moved it into the specialist sector in October last year.

Ellis says: “Multi-asset funds should either move to the managed sectors if they want to be constrained by the definitions or to unclassified or specialist sectors.”
BlackRock head of UK retail sales Mark Eliott and M&G head of global sales Jonathan Willcocks have both called for absolute return funds to be classified by volatility.

OPM fund management chief investment officer Tony Yousefian agrees. He says: “Absolute return funds should be categorised by bands of risk and, within that, the returns. Risk-adjusted returns are far more important to investors than just total return.”

Philippa Gee Wealth Management managing director Philippa Gee says: “There is an incredible variety of absolute return funds and so there should not be the expectation that something in the sector will necessarily protect assets and deliver. Whether it is the adviser or investor, to use the sector type as the sole form of research is ludicrous.”