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Split over absolute return sector proposal

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Advisers and product providers are divided on the Investment Management Association’s suggestion to link the absolute return sector with managed sectors in a bid to categorise the risk level of funds.

Speaking at a recent investment seminar, IMA director of markets Jane Lowe said that now the absolute return sector is beginning to mature it is time to find its “permanent home in the sector scheme”.

She said: “One option may be to link the absolute return sector with the managed sectors, indicating whether it sits at the more or less conservative end of the spectrum. In the event it was repositioned in this way, we would need to adjust the definition to reflect that.

“The two criteria currently in use allow a range of risk characteristics to be gathered into the sector, whereas a more constrained focus would, for example, require a narrowing of permitted risk.”

Hargreaves Lansdown senior analyst Meera Patel (pictured) says: “There are more complexities to factor in by making this move. Absolute return funds can do completely different things.

“Some are market-neutral while others have a big exposure to markets. There is also shorting to factor in and weighting to asset classes in different sectors. It could create more confusion.”

Whitechurch Securities managing director Gavin Haynes says: “It is difficult to compare absolute return funds so placing them in the managed sector could be a way for advisers to garner a better understanding of what is going on inside them, however it is not the perfect solution and the best way to know what is going on in an absolute return fund is to look under the bonnet.”

Martin Currie head of product development Toby Hogbin says: “It is important to find a different solution to categorise these funds but this is a step forward in that direction.”

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