The Investment Management Association is set to clarify the way fund managers should define risk in relation to risk-profiling and risk-rated funds.
The trade body has established a working group to study risk measures and risk objectives of UK funds to help members describe risk.
The working group is to publish a white paper for members, expected in the next few weeks, highlighting the distinction between measuring risk at a given point and taking into account future risk objectives.
An IMA spokeswoman says the paper will “encourage good practice by setting out a series of questions that fund managers should ask themselves, and be able to answer, about their risk management and risk objectives.”
Money Marketing understands the white paper will also look at the differences in measuring risk when risk-rating or risk-profiling funds.
The JHC Partnership director Keith Iless says: “The IMA should share this paper with advisers when it comes out, as a lot of advisers still do not understand the implications of investment risk and how risk is assessed.”