Consultation on the future of the Global & Specialist sectors

The IA has launched a consultation into the future of its Global and Specialist sectors proposing the creation of eight new sectors. Responses are welcomed from all stakeholders interested in the distribution of funds in the UK. The deadline for responses is Friday 11 December 2020. The consultation paper can be found here.

These sectors have been formulated based on discussions with investment managers, the IA Sectors Advisory Group and a number of fund selectors to ascertain the characteristics that they value in their portfolio construction.

The proposed new sectors can be broadly broken down as:

  • New country/regional equity sectors: Latin America; India; Global Smaller Companies
  • Industry sectors: Financials; Healthcare
  • Alternative investment approaches: Infrastructure; Commodity/Natural Resources; Gold and Precious Metals

This consultation focuses on creating more granular sectors from the existing universe of funds in the Global and Specialist sectors and from the ETF submissions, where the ETF has elected to join these sectors. It is expected that many of the funds that will populate these new sectors will be drawn from the Global and Specialist sectors and from the ETF submissions but there may be funds in the other regional equity sectors that would be eligible to join.

 

 

There are over 35 IA sectors. These are there to help anyone navigate around the large universe of funds in the UK and include some offshore (EU) funds.

The sectors divide up the funds into smaller groups, to allow you to make like-for-like comparisons between funds in one or more sectors, for instance to look at performance and fund charges.

 

IA sector definitions

Each sector has a clear definition setting out the criteria a fund must fulfil. We’ve organised most sectors based on the main asset types the fund invests in. Funds in any sector may offer a wide mix of asset, strategies and risk profiles. Look up individual sector definitions.

 

What sectors are there?

There are around 3,000 funds on sale in the UK. Our sectors provide a way to divide these into broad groups, so investors and advisers can compare funds in one or more sectors before looking in detail at individual funds.

 

Managing the sectors

IA’s sectors are overseen by our Sectors Committee. An independent monitoring company checks the funds monthly to ensure they comply with the sector definition. If they don’t, we can remove them. Find out more about how we manage sectors and our Sector Committee reviews.

 

How we organise sectors

Broadly, we split funds between ‘income’ and ‘capital growth’. We then classify these by asset type, region or industry sector they invest in. Some sectors focus on protecting capital or are in a Specialist category, while others are Unclassified. Some sectors group together funds with an outcome focus such as Targeted Absolute Return or the Volatility Managed sector. See more about sector classification.

 

Performance

A key way the industry, fund selectors and distributors use fund sectors is to compare performance. Please note, data vendors collect performance data to calculate sector averages. We think common comparisons are a good thing and support data vendors to identify a ‘primary’ share class in the post-RDR (retail distribution review) world. Find out more about fund sector performance.