Out with the old

The approach of the New Year always offers a time for reflection and change, something the the Investment Management Association (IMA) will know only too well.

In recent weeks, the IMA has announced a number of changes to its sectors all due to take effect from January.

The trade body is to relaunch its Money Market sector, launch a new Global Equity Income sector and harmonise its managed sectors with the Association of British Insurers (ABI).

The latter action has come after what could be described as a lukewarm reaction to an earlier proposal to rename the existing after letters of the alphabet.

It has plumped for the more descriptive sector names employed by the ABI, after failing to reach consensus over broader descriptions.

Ben Yearsley, investment manager at Hargreaves Lansdown, says the changes should be welcomed, adding: “Although the names may be cumbersome, they give an idea about what the funds in those sectors invest in.”

The reclassification of managed sectors will also allow asset managers to reassess the sectors their funds are currently found in, he says. (FundTalk continues below)

For the moment the Absolute Return sector appears to have taken a backseat. A decision is to be made early on in 2012, it’s understood.

Many have called for the sector to be split, indeed Morningstar – which was apponted to monitor sectors by the IMA earlier this year – has already split the sector into 18 different sub-categories.

An easier problem for the trade association to solve was the creation of a global equity income sector. Many in the industry have been calling for a separate global equity income sector for a number of years.

Still more will await a European equity income sector, which the IMA would, seemingly, like to introduce but must await the sector to grow to meet its 10 minimum rule.

However, the IMA seems to be mindful of lessons learned after the splitting of the IMA UK Equity Income sector. Funds in the Global Equity Income sector will have to deliver a yield in excess of 110% of the MSCI World Index over a three-year rolling period.

The three-year rolling period was brought in when the UK Equity Income sectors were remerged in 2010, as funds in the sector found it increasingly difficult to deliver targeted yields.

US president Abraham Lincoln once said: “You can please some of the people all of the time, you can please all of the people some of the time, but you can’t please all of the people all of the time.”

With the introduction of the new sectors and the revamp of the managed sectors, we will surely see if the IMA has succeeded in the New Year.