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3 April 2017

Elite funds move sectors


Elite Rated Rathbone Strategic Growth Portfolio, which was previously housed under the Investment Association’s Unclassified sector, has been moved to the new IA Volatility Managed sector. The sector, which was launched on 3 April 2017, comprises 83 funds and was created to better group risk-targeting funds for investors looking for outcome-focused products.

It is the second time the IA have re-jigged sectors this year. Last month, it decreased the yield target for its UK Equity Income sector, as an increasing number of income-focused funds were failing to meet requirements and being forced to drop into the UK All Companies sector. These included the Elite Rated Rathbone Income, Schroder Income and Evenlode Income. Many groups argued that the calculation wrongly prioritised absolute yield over potential for dividend growth, and we agreed. Many more funds previously removed have also now applied to re-join the sector.

Managing director Darius McDermott commented: “When Rathbone, Schroders and Evenlode’s Income funds were removed from the sector last year, we continued to compare them to the sector as we felt fund managers shouldn’t be forced to buy higher yielding stocks just to meet a rule. The yield reduction was necessary and will now make it easier for managers to stay true to their investment process.

“Many funds within the IA Unclassified sector lack investor comparability because there are so many different types. The new sector launch is something that will help plug that gap somewhat when it comes to risk-targeting funds, although we do still have some way to go before investors can easily compare funds within each IA sector. I look forward to the sector review in a year’s time and whether this will prompt further IA action with regards to other sectors and subsectors in future.”

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Darius's views are his own and do not constitute financial advice.