Baillie Gifford is moving £9bn worth of funds out of a ‘dumping ground’ sector and into the Investment Association’s Targeted Absolute Return sector.
The £1.8bn Multi Asset Growth fund and £7.2bn Diversified Growth fund were both previously in the IA Specialist sector. Baillie Gifford said the move more accurately aligns the funds’ objectives with the sector and peer group.
Tilney managing director Jason Hollands reckoned the move seemed reasonable. “The Targeted Absolute Return sector is certainly a lot more of an appropriate home for them than Specialist sector, which is frankly a bit of a random dumping ground for misfits, including strategies that range from single region emerging market funds through to resources funds.”
Chelsea Financial Services managing director Darius McDermott also thought the funds did not belong among “the weird, the wonderful, the country specific, thematic specific” of the Specialist sector. “These are low risk, multi-asset portfolios and it just made no sense for fair comparison so they’ve moved the funds to a sector that they think is most appropriate.”
Targeted Absolute Return sector ‘mixed bag’
However, some questioned whether the Targeted Absolute Return sector is the best new home.
The IA’s Targeted Absolute Return sector requires funds to be managed with the aim of achieving a positive return after fees in any market conditions within a timeframe of up to three years.
AJ Bell head of active portfolios Ryan Hughes said: “While I understand the rationale for the move, I don’t think it is a sensible one but that’s more to do with the inappropriate definition of the IA Targeted Absolute Return sector.
“The three-year timeframe that the sector insists on is a poor one and has resulted in some funds in the sector that have performance profiles very far away from those expected by an absolute return fund in the eyes of investors which have devalued the sector as a whole I the last couple of years. While I note that the fund objectives work to the three year timeframe to match the sector requirements, potential investors will need to tread carefully when researching funds in the sector as the strategies used may well be very different and not necessarily be comparable.”
Willis Owen head of personal investing Adrian Lowcock said the type of funds featuring in Targeted Absolute Return was changing.
“The sector originally formed to capture hedge funds and not multi-asset funds and as such it raises the question about the suitability of other IA sectors such as the Mixed Investment sectors which is where you’d typically expect multi-asset funds to appear and indeed do feature some comparable funds will appear,” he said.
