The Centre for Policy Studies is finalising a report that will call for the Investment Management Association to stop labelling funds, claiming it has vested interests.
The report, due to be published in June, will make around 100 recommendations on how to put investors at the centre of the industry’s approach.
Speaking to Money Marketing, the report’s author, CPS research fellow Michael Johnson says by labelling Arch cru funds as cautious managed, the IMA “unwittingly facilitated” misunderstandings about the risk posed by the funds.
Johnson says: “It would help investors if funds have labels but what is the underlying objective of the IMA’s involvement in this area? It is to promote the interests of it members and sell more funds.
“Arch cru funds were sold by salesmen on the basis of the cautious managed IMA label and the implication from that was the risk was low. We have now come to learn it clearly was not. Therefore, the IMA unwittingly facilitated what has emerged.”
The IMA has since moved to a system where it labels managed funds as either mixed investments 0-35 per cent shares, mixed investments 20-60 per cent shares or mixed investments 40-85 per cent shares.
An IMA spokeswoman says: “The IMA sectors are not and never have been risk ratings.”
Hargreaves Lansdown senior analyst Meera Patel says: “The IMA categories offer some guidance but they should not be followed slavishly.”