IMA attacks ABI sector plans as 'inconsistent' with RDR

The IMA has criticised the ABI's proposed changes to its Managed sectors, arguing the suggested names are “opaque” and inconsistent with RDR and TCF principles.

In a recent consultation paper, the ABI proposes the Mixed Asset Sectors (presently known as Defensive Managed, Cautious Managed, Balanced Managed and Flexible Managed) would all be unified under the Mixed Investment Shares tag. 

However, there would be numerical references to the range of equities the funds can hold. Defensive would become Mixed Investment 0-25% Shares, through to Flexible, which would known as Mixed Investment 0-100% Share.

In its response letter, the IMA’s head of sectors Nicola Kembey says although there is traditionally a strong convergence between the IMA and ABI sectors, the association does not agree with these new proposals.

She warns the new names will not help clients better understand the products they are being offered.

“The proposed names are opaque and, in our opinion, may not be consistent with the principles of RDR and TCF.

“At a time when the industry is moving towards being more open and transparent with the client, this could be construed as a move by the ABI to disassociate itself from helping consumers to understand the differences between the various strategies employed in the managed sectors,” Kembey said.

The IMA also criticised the use of the word ‘shares’ instead of equities, believing this fails to recognise equity exposure may be gained from the use of derivatives.

“Naming only one risk asset is felt to be potentially unhelpful, possibly even misleading,” she adds.

As the IMA sectors do not have minimum levels for their equity holdings, it may also not be possible for them to be harmonised with the proposed definitions. If the parameters were changed, fund managers who had previously moved outside the new boundaries could lose their track records.

Jane Lowe, director of markets, says the Absolute Return sector could be linked to the Managed sectors.

The IMA is in the second phase of reviewing its sectors with the third and final phase involving consultation with intermediaries. It expects to publish its decision by the end of Q1 2011.

Proposed name changes