More than one in 10 unit trusts are falling foul of Autif sector definitions, with many funds appearing to diversify investments to gain an advantage over their peers.
Monthly data from Lipper analysing geographical breakdowns of around 700 funds across 18 sectors shows up to 80 funds fall outside sector boundaries each month.
Firms can break the limits by exceeding the equity or cash components in their fund.
City Financial has been identified as one of the leading culprits, with funds in several sectors exceeding sector boundaries.
Sector rankings are central to marketing efforts, leading to concerns that they are in need of greater policing. Funds can cross the boundaries temporarily due to takeovers or unforeseen circumstances but there is concern that some managers abuse the limits.
Autif communications dir ector Anne McMeehan says: “If we can't rely on the discretion of fund managers to monitor themselves, we will have to introduce a system which will be more robust in enforcing its remit.”
Friends Ivory & Sime director of global equities Bambos Hambi says: “We have complained to Autif about City Financial but have had no joy.”
City Financial marketing manager Hamish Archibald says: “All our management contracts are delegated so it is difficult to give a house opinion. Our high cash positions have been defensive measures in volatile markets.”