The Investment Association is to launch a new Volatility Managed sector in November in a bid to accommodate the largest group of funds in its Unclassified sector.
The new sector will aim to group the growing ranks of outcome-focused funds emerging in the IA’s sector scheme. Funds in the new sector will have a common characteristic of targeting a client’s attitude to risk, set out in terms of volatility. At the moment funds of this nature are presently situation in the Unclassified sector.
In a statement today the IA said that it has decided to add the new sector to rather than sanction a complete reorganisation of the sectors, something that was mooted when the issue was first formally consulted on last year.
The IA said that the new Volatility Managed sector will have a “high hurdle of transparency for potential constituents”, when it goes live in November. Funds will be required to publicly disclose that the fund is managed with the intention to deliver a volatility or risk outcome as well as provide advisers and consumers with information on how volatility is measured – including the time frame over which data is calculated.
Drive towards outcome-focused products
The is the first step in the IA’s work to reflect the market’s drive towards outcome-focused products. Further work on the sector may take place once the population of funds is identified, the statement said.
Galina Dimitrova, director of Capital Markets at the IA, said that the association has reacted due to “changes to the distribution chain, new regulation and the introduction of the pension freedoms”, which have seen an evolution in the products offered by the asset management industry.
“The IA sectors always look to evolve alongside the universe of investment funds available to investors, and the launch of the Volatility Managed sector is an important step to grouping more outcome focused funds together for the benefit of consumers and advisers when making investment decisions,” Dimitrova said.
“We will continue to work with our members, advisers and consumer groups to ensure that the sector definitions resonate with the investment funds the industry offers.”
The IA is now calling upon its members to elect the funds that they believe fit this new definition. The IA’s Sector Committee will then review this selection of self-elected products to ensure they meet the new requirements.