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Firms clash with ABI on sector labels overhaul

Advisers and providers have hit out at the Association of British Insurers’ overhaul of the managed sector labels, saying they imply that equities provide the only element of risk.

Sector names, including defensive, cautious, balanced and flexible, will be replaced next month with “mixed investment” and a statement of how much each type of fund can hold in equities.

For example, defensive becomes managed mixed investment 0-35 per cent shares while flexible becomes managed mixed investment 60-100 per cent shares.

The ABI managed fund sectors contain almost 2,000 life and pension funds worth £340bn, 80 per cent of which are invested in managed funds.

T. Bailey fund manager Jason Britton says the ABI sector definitions overlook the fact that there are other risks outside equities. He says: “Risk is everywhere.
There are risks in bonds, there is inflation risk, there are unknown risks in alternatives and there is the very serious risk for long-term investors of not having enough money in equities if they wish to see a real return.”

Skerritt Consultants head of investments Andy Merricks says: “The new names do not mean much and give the impression that equity is the only risk.”

The IMA is also reviewing its managed fund sectors and is expected to announce changes at the end of the year.

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