Not that we should be surprised. There have already been a number of delays and setbacks to the review, so much so it could be likened to the FSA’s much-delayed platform paper.
The review started in January of this year and was expected to take six weeks to publish a consultation paper.
Its proposals for the future of the sector were in fact released in May and responses were to be submitted by 3 July.
The timetable for a conclusion to the review at that stage extended to the end of 2012, something Jane Lowe, director – markets at the IMA, hinted at back in February at an event run by Portfolio Adviser.
Fast forward five months and here comes Daniel Godfrey, the IMA’s new chief executive, who is eager to make his mark.
“I am aware that we had hoped to have clarity on the future shape of the Absolute Return sector by the end of 2012. This is an important issue for consumers and, having only taken over as chief executive this month, I want to consider all the evidence and all the options thoroughly,” he said.
Meanwhile Standard Life Gars and Newton Real Return (the two biggest absolute return funds on the market) have continued to enjoy significant net inflows this year with £2.7bn and £1bn respectively – well ahead of most of their peers.
Gary Reynolds, chief investment officer at Courtiers, is one of a few wealth managers that distrusts Standard Life Gars and would not use it in his clients’ portfolios.
The last time I caught up with him he commented that the strategy is impossible to understand and so cannot be justified for inclusion, or assessed for suitability.
Scandal sure to erupt
But there is obviously enough appetite for it elsewhere, with the strong inflows it has seen, backed up by the fact it is in the top three funds in terms of sales at Bestinvest this year.
This is why it is crucial for the Absolute Return Sector Review to be completed as soon as possible, because the longer people carry on pumping money into something they do not understand the greater the potential for a mis-selling scandal.
Gina Miller, co-founder of SCM Private and the True and Fair Campaign has railed against the delay too.
Her view is absolute return funds are being blatantly mis-sold to the public and delaying the response to the view has not instilled any confidence in the quality of analysis undertaken by the IMA so far.
“The FSA warned as long ago as January 2011 and again in March 2012 that consumers may not understand the complexities of absolute return funds and may believe there is an element of capital protection or guarantee of a positive return,” she explained.
It is understandable the IMA wants to make sure it gets this right after the embarrassment of the Managed Sectors Review.
As an industry body responsible first and foremost for the interests of its member fund groups, however, one cannot help but think it is the whims of the big absolute return players it is struggling so hard to reconcile with investor interests.
But if the IMA (and Godfrey for that matter) do not make a point of sorting this out soon there could be a far bigger embarrassment to come, for both the trade body and its interested member parties.
