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Farquhar wants volatility sector

London & Capital head of UK retail distribution Jamie Farquhar believes the Investment Management Association should introduce a volatility-based sector to allow multi-managers greater investment flexibility.

Farquhar believes investors would prefer fund managers to have the freedom to invest on the provision that they adhere to a risk profile rather than being constrained to an IMA sector which has specific boundaries on asset class holdings.

He says: “The trouble is that when product providers create these vehicles, they have dictated sectors from the IMA which can restrict investment. You also have to adapt to changes, as with the one made to the cautious sector in 2007.”

Farquhar says the other option is being placed in the unclassified sector, which he believes many multi-managers will see as an unattractive option. He says: “The unclassified sector is seen as somewhere for all the oddball funds to congregate and I believe that managers would much rather invest in a sector based on that volatility premise.”

Skandia recently announced the launch of its Spectrum fund range. The six funds will be positioned in the unclassified sector as each fund is benchmarked against volatility targets.

A Skandia spokesman says: “If you got to a position where a volatility sector was workable and compared like for like, then we feel it would be a benefit but it would take a lot of work to get to that position and would be difficult to achieve.”

An IMA spokesman says: “All our sectors are based on asset classes and we have had no call to introduce such a sector. I would say that if someone has issues they should write to our performance category review committee to allow them to discuss it.”

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