ABI to cull 'cautious' label for 'mixed investment'

The ABI will today announce plans to scrap its "misleading" managed fund sector names after research showed they were too difficult for consumers to understand.

Sector labels such as ‘cautious' and ‘balanced' will be replaced with ‘mixed investment'.

They will also include a clear statement outlining how much each type of fund can hold in equities, the Financial Times reports.

The new sector names were "significantly less likely to lead to misinterpretation," the ABI says.

Research by the ABI suggested existing names did not sufficiently convey risk to consumers, prompting the ABI to make the sector label changes.

It found about 80% of people thought ‘cautious managed' represented a low-risk investment, compared with just 12% who thought a 'mixed investment 20-60 per cent shares' was low risk.

The move comes as investment fund names are under industry scrutiny.

In January, Barclays was fined £7.7m after selling two Aviva funds labelled ‘cautious' and balanced', which transpired had been misunderstood by many of their investors.

The IMA is also reviewing its managed fund sectors, although changes are not expected to be announced until later in the year.