The wires have been hot with ramp-ant debate over some minor chan-ges to the major sectors of the managed fund world. Now that the dust has settled somewhat, is it not just a storm in a tea cup after all?
As multi-managers who, with our peers, now represent more than 50 per cent of the population of all three of the ABC sectors, we should be live to this debate and we are. But first, what are the motives for the changes? No misselling has been reported on managed funds to my knowledge although there have been some incorrect classifications by advisory firms such as those at Barclays. These seem perhaps to result more from the difficulty of controlling a big IFA (or in this case sales) force as a non-core business, hence perhaps why Barclays pulled out of advice. Who knows for sure but the point is no specific event or new need created this clamour for change.
It appears the ABI has some consumer research that says they do not understand what cautious and balanced mean but in the independent sector, which continues to dominate the sales in the IMA’s industry group, do we need change at all? It seems more that the IMA’s hand has been forced a little by the ABI’s move, whose own new sector classifications only seem to move the game on for printing ink purveyors. The IMA’s justification seems to be that there is a need to almost force investors to explore a fund’s mandate further. Because the fund will only be described as an A fund, for example, this may help indirectly inform the buyers a little and is certainly a lesser evil than the ABI’s approach.
As Richard Saunders opines in his blog, now that change is afoot, we need to put up better alternatives or shut up. Although I do not believe any change was necessary, I have yet to see anything of those alternative suggestions put forward so far that does anything other than pushes the sector rules and definitions up into the sector (and therefore likely into the fund’s) name.
So, if change it has to be then let’s have the ABC, but please do not meddle with the investment restrictions applying to the underlying funds.
Robert Burdett is co-head of multi-manager at Thames River Capital