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LV= calls on IMA to split absolute return sector

LV= Asset Management has called for the IMA to divide the absolute return sector into sub-sectors to separate out funds that use structured products or shorting strategies.

The IMA is currently reviewing the absolute return sector and last month proposed renaming the active, balanced and cautious sectors managed A, B and C and creating a new managed D sector.

Speaking at the Money Marketing Investment Summit in Bedfordshire last week, LV= head of multi-manager Paul Kim said: “The absolute return sector could be split into two or more sub-sectors. Separating out whether funds short stocks or use structured products would be useful, as they pose different risks to normal portfolios.”

Kim added that some funds with absolute return strategies have crept into the cautious sector. He said: “There should be clear definition on the style of management for the sectors.”

Last week, M&G’s head of global sales Jonathan Wilcocks called for a ban on absolute return funds in the managed D sector.

Bestinvest senior analyst Ben Seager-Scott says: “Absolute return has perhaps been misrepresented to some clients because the industry has not done a great job in highlighting the fact that absolute return is a target, not a promise.

“Any differentiation within the absolute return sector would be a good thing, as long as it is done sensibly and the sub-sectors are suitably descriptive.”

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