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IMA: Why our investment sectors need constant review


The IMA sectors have existed in one form or another for many years. Anyone familiar with the unit trust year books can trace them back to the early 1960s.

They were put together to divide up the large universe of authorised funds into more manageable buckets so that advisers and consumers can make comparisons on a like for like basis.

Historically, the sectors have been defined by the assets that funds invest in. However, as markets and financial instruments evolve, so too does the fund universe that the sectors seek to sub divide. This creates a need for the sectors to be regularly monitored and reviewed to ensure that the classification system reflects the current realities of the funds market.

A particular recent trend has been an increase in the number of funds that offer either an outcome objective or a ‘packaged solution’ for their investor. This led to the creation of the Absolute Return sector in 2008 which has been regularly reviewed to keep abreast of how these types of funds have been developing.

The most recent review concluded at the beginning of this year and resulted in changing the definition of the sector, improving transparency on fund timeframes and objectives, and renaming the sector to Targeted Absolute Return to address concerns that Absolute Return implied a guaranteed return.

Feedback from the users of the sectors also led to the development of a tool which provides additional information, helping potential investors and their advisers narrow down the universe of funds even further by applying filters of their own choosing, such as the risk rating of the fund, the benchmark being used and the timeframe by when the fund aims to achieve a positive return.  This tool is now live on the IMA’s consumer website and feedback and comments are welcome to help it to continuously improve and be effective for the users.

Alongside the new product ranges that require oversight and new classification processes, the more traditional asset classes still need attention – changes in the market led the IMA to take another look at the fixed income sectors and make some changes earlier this year. 

Of particularly significance were the modification of the definition of the Sterling High Yield sector and the announcement of the introduction of a Global Emerging Market Bonds sector from 2014.

Heading into 2014 there are a number of projects in the pipeline. As users of the IMA sectors, your views are invaluable to shape the sectors and ensure that they are helpful and effective in grouping similar funds in order to make like for like comparisons.

Nicola Kembey is head of sectors at the Investment Management Association



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