In a press release, head of research at the data provider, Rob Gleeson called the IA classification “inappropriate” for risk-targeted funds adding: “We believe risk-targeted funds are not being well represented in the IA Mixed Asset sectors. These funds aren’t designed to beat sectors, they are designed to match a certain risk-target, so they shouldn’t be judged on their performance against a sector.”
According to the new system, the best 10% of risk-targeted funds will receive a five crown rating from FE.
Sam Walker, head of data at FE, added: “Advisors have been calling out for a facility which will allow them to see all of these risk-targeted products under one umbrella, not scattered amongst IA sectors, or unclassified. They want to do research and governance on such solutions, and see how much return has been generated for the volatility it has exposed its investors to.”
In response, the IA said: “Most funds that have a specific risk (volatility) target in their objective have typically not chosen to be classified in the Investment Association Mixed Asset sectors – preferring to remain unclassified. We are launching a consultation shortly that will address these areas and the future of the Unclassified sector.
Speaking to Portfolio Adviser in November, Jonathan Lipkin, head of public policy at the industry body, said: “There is significant growth in the unclassified sector and we are looking at the moment, very seriously at how to address that,” he said in November.
During the interview, he also acknowledged that the group is sometimes criticised for not moving quickly enough, but pointed out: “Our approach is always to respond to developments in the market. What we try to do is take a considered view, consult members, take account of the interests of users and reach a decision that is both durable and coherent.”
