Fund commentators have criticised the Investment Association’s decision not to proceed with launching a dedicated sector for UK mid-cap funds, warning the extensive UK all companies sector could cause confusion for retail investors.
The IA’s sectors committee recently consulted with members of the trade body to ascertain whether a sub categorisation of the IA UK all companies sector would be beneficial for investors, and whether fund groups would be keen on joining the proposed mid-cap sector.
Ryan Hughes, head of fund selection at AJ Bell Investments, says: “It is disappointing that the IA are not progressing with plans for a dedicated UK Mid Cap sector. While the sector would have been relatively small, it would have resulted in a much clearer method of comparison as to whether this group of funds are doing a good or bad job.
“By keeping them buried in the 266-strong UK all companies sector, there runs the risk of confusion and inappropriate comparison being made as this sector is a collection of large-cap, mid-cap and multi-cap strategies. When looking at mid cap funds, we specifically ignore any sector rankings on the basis they are not relevant, and while this is fine for professional investors, it runs the risk that retail investors may end up making decisions based on inappropriate data and quartile rankings which clearly is not a good outcome.”
Ben Yearsley, director at Shore Financial Planning, says: “It’s a shame the IA has ditched plans to launch a mid-cap sector. The UK all companies sector is probably the least useful sector as it contains such a diverse mix of funds and could do with some form of splitting.”
A spokesperson for the IA says: “We are continually monitoring the fund market to ensure that all of the IA sectors reflect the wide range of products the asset management industry has to offer savers around the world. The primary purpose of the IA sectors is to serve the needs of consumers and their advisers, and any change to how they are classified must be done in their best interests.”