Fidelity suggests Managed definitions based on 'risk assets'

Fidelity has proposed new names for the IMA Managed sectors based around their total exposure to 'risk assets' not just equities.

The IMA is currently consulting with the industry on its plans to overhaul the Active, Balanced and Cautious Managed sectors. Many fund groups, including Fidelity, openly criticised the proposals, arguing they would not improve transparency for consumers.

Gary Shaughnessy, UK managing director at Fidelity International, said: "We agree with the IMA that descriptive names such as the existing ones do imply value judgements and will differ for each individual. But we disagree that you can't convey the flexibility of these funds in a name or that names based on asset allocation limits would be unwieldy. We believe content oriented names similar to the ABI categories would be better."

However, he said the ABI naming system was not without its drawbacks as by stating the equity content it implies this is the only risk element in the fund.

"With derivatives now widely used and a number of other asset classes like property and commodities now common place in managed funds, this could be completely misleading," Shaughnessy said.

"We believe that the amount the fund can invest in total in 'risk assets' would be better. Detail on these assets (and indeed the statement that bonds and other defensive assets are not entirely without risk either) could be included in the definition/notes of the sector."

Fidelity's suggested names:

Mixed investment - maximum 35% risk assets

Mixed investment - maximum 60% risk assets

Mixed investment - maximum 85% risk assets

Mixed investment - maximum 100% risk assets

Fidelity said the final proposals for the sectors, after the IMA's three week consultation, should then be shown to advisers and investors for their feedback.