The Investment Association is looking to split its Global and Specialist sectors into a larger number of smaller but more focused peer groups in a move it says will help investors more easily find and compare funds.
In a consultation document, the trade body has suggested further dividing funds in the two sectors into three areas of country/region, industry and alternative investment approaches, and into new sub-sectors within these (see list below).
The IA Global sector has 371 funds, accounting for £139.7bn in assets, while the Specialist sector has 273 funds with £5bn in total assets.
The IA is reassessing the formation of its peer groups after last year allowing physical exchange traded funds to be added to existing sectors and asking ETF providers to submit their products for classification. IA Global and Specialist were two sectors that received high numbers of ETF submissions, the IA said.
It follows a similar consultation in September on splitting the Global Bonds sector into 10 sub-groups.
‘More granular sectors’
The IA’s paper said: “This consultation focuses on creating more granular sectors from the existing universe of funds in the Global and Specialist sectors and from the ETF submissions, where the ETF has elected to join these sectors.
“It is expected that many of the funds that will populate these new sectors will be drawn from the Global and Specialist sectors and from the ETF submissions, but there may be funds in the other regional equity sectors that would be eligible to join.”
A positive move to address two ‘bloated’ sectors
AJ Bell head of active portfolios Ryan Hughes (pictured) said it was a positive move by the IA because the Global and Specialist sectors have become “bloated”.
He said: “The result could be a number of new sectors both at a regional and sector level that will help investors properly compare similar strategies and make quartile rankings more meaningful again.
“Areas such as infrastructure and healthcare have grown in popularity in recent years and therefore moving funds such as these into their own dedicated sectors makes a lot of sense and reflects what many fund researchers and selectors are already doing in creating their own bespoke peer groups to ensure meaningful comparisons.”
The consultation will remain open for comment until Friday 11 December.
Proposed sectors and definitions
New country/regional equity sectors
Latin America (18 funds)
Funds which invest at least 80% of their assets in Latin American equities
India (23 funds)
Funds which invest at least 80% of their assets in equities of India/the Indian sub-continent
Global Smaller Companies (12 funds)
Funds which invest at least 80% of their assets in the equities of companies that form the bottom 15% by market capitalisation of the global market or that are no larger than the largest company in a recognised global small cap index (such as the MSCI AC Country World Small Cap Index)
Industry sectors
Financials (19 funds)
Funds that invest at least 80% of their assets in equities of financial services companies as defined by ICB/GICs, including industries such as banking, insurance, capital markets and consumer finance in any country
Healthcare (15 funds)
Funds that invest at least 80% of their assets in equities of companies that operate in sectors related to healthcare as defined by ICB/GICs, including industries such as pharmaceuticals, biotechnology and life sciences and healthcare equipment and services in any country
Alternative investment approaches
Infrastructure (24 funds)
Funds that invest at least 80% of their assets (directly or indirectly) in companies involved in the ownership, operation or maintenance of infrastructure assets (including but not limited to: utilities, energy, transport, health, education, security, communications)
Gold and Precious Metals (10 funds)
Funds that invest at least 80% of their assets in precious metal related securities
Commodity/Natural Resources (31 funds)
Funds that invest at least 80% of their assets in commodity or natural resources related equities
