The question of which sectors funds are placed often gets groups and advisers over-heated. The Investment Management Association (IMA) and its Performance Category Review Committee are constantly fielding requests to create new sub-sectors. To add to the fire, Fund Strategy has received an open letter to them from Bruce Dalton, a veteran investor, calling for the creation of an Overseas Equity Income peer group.
On the face Dalton has a point. He notes there are 25 overseas equity income funds, which are scattered across seven various sectors. His argument is that it would be much more helpful for them to all be placed in one peer group, which itself would stand alongside the UK Equity Income sector. An overseas income sector would be also useful because it would focus investors’ attention on the strategy.
The problem the IMA faces is that of those 25 funds, Dalton says eight (10 according to Fund Strategy) are Europe ex UK. The managers and groups of these funds would much rather be placed in a European equity income sector than a broader global peer group.
So what is the IMA to do? If it creates an overseas equity income sector it faces the prospect of having to break up further down the line into smaller sub sectors. Or does it just wait and create separate sectors when there are enough funds in each to make a meaningful comparison? (the IMA has always stated it will consider a new peer group when there are 10 or more funds).
Perhaps more will be learnt if an answer to Dalton’s open letter is forthcoming.