IA unveils Volatility Managed sector; considers sub categorisations

Portfolio-Bonds-Investment-Business-700x450.jpgThe Investment Association has unveiled its Volatility Managed sector to accommodate the increasing number of outcome-focused products, and says it may sub categorise the sector.

At sector launch, there are 83 funds with combined assets under management of £19.3bn listed, including products from: Allianz, Architas, Aviva Investors, BlackRock, Cornelian, Henderson, Invesco, LGIM, Rathbones, Santander and SLI.

Firms can elect to have their funds classified in the sector, although the Sectors Committee will remove funds that appear to be incorrectly classified.

The new sector sits alongside the Targeted Absolute Return sector under the umbrella ‘funds principally targeting an outcome’. The Volatility Managed sector is aimed at funds with returns managed within specified volatility parameters that do not guarantee a set outcome. Such funds use diverse investment strategies, often employing derivatives, with asset allocation at the discretion of the manager.

The IA says performance comparisons should not be made within the new sector as the funds may differ in their benchmarks, investment horizons and risk characteristics.

An annual review of the sector will be conducted by the IA Sectors Committee, which will determine whether it is possible “to develop or sub categorise the sector in a way that better serves investors”.

Galina Dimitrova, director, Capital Markets, says: “The launch of the Volatility Managed sector is the latest step by the industry to ensure that the IA sectors continue to evolve alongside market changes and appropriately reflect the advent of more outcome focused products available to investors.

“We will continue to monitor the sector definitions across the board to ensure that they work in the best interests of consumers and their advisers and appropriately reflect the wide range of funds the industry has to offer.”