Scottish Widows Investment Partnership has reclassified its multi-manager funds on Lipper after the ABI ruled they were in breach of its unit-linked retail fund classifications.
Three Widows' funds, which invest in manager of manager funds run by Russell Investment Group, are in an unclassified sector after the ABI's investment committee ruled they were violating its requirements. The committee objected to the way that Swip hedges Russell's overseas investments back to sterling as it believes there is a different underlying risk profile to UK-denominated assets.
One of the funds affected is Swip's cautious portfolio which, despite being more than 60 per cent invested in overseas bonds, was positioned in the UK fixed-interest sector. The ABI requires funds in the sector to hold at least 80 per cent in sterling-denominated assets. Its committee accepted that hedging removed the currency risk but ruled that it did not mitigate the overseas asset risk.
The other two funds – the balanced and progressive portfolios – fell foul of ABI rules for similar reasons but Russell says Swip and its parent have no intention of changing their approach to suit the sector requirements.
Russell director Peter Hugh-Smith says: “We are talking with the ABI. We do not want to change something for business reasons if it is not in clients' interests.”
ABI spokeswoman Melanie Claisse says: “We gave Widows a lot of leeway to present its case but it is our duty to enable people to compare funds on a like for like basis.”