They were formerly monitored by Lipper and had been since the IMA began monitoring sectors back in 2002. After a tender process that was started in November 2010, Morningstar will formally take over in October this year.
Their remit will be to provide an analysis of the portfolio holdings of each fund in the IMA sectors to ensure each one meets the parameters and definitions of the sector and is as comparable as they possibly can be with other funds in that sector.
Part of the role means Morningstar will also alert the IMA to any breaches, where a fund’s holdings fail to meet sector requirements.
Geoff Balzano,chief executive at Morningstar UK, adds: “Particularly crucial now is the increasing use of derivatives in investment management and the parallel importance of transparency around their use. By working with the IMA, we are helping to ensure that its sector classification system will evolve to capture and reflect the impact of these increasingly important securities.
“Morningstar will work with the IMA to develop rules for monitoring funds that are not suited to long-only portfolio monitoring. This will include the identification of the increasing number of funds using derivatives for investment purposes beyond efficient portfolio management and the development of a recommended disclosure standard for derivatives holdings.”
This fits nicely with the IMA’s current review of its sector definitions, brought about in part by the Ucits rules and regulation that allow the use of derivatives.
