There are over 50 Investment Association sectors. Sector definitions are mostly based on assets, such as equities and fixed income, and may also have a geographic focus. A few sectors focus on investment strategy, such as Targeted Absolute Return and Volatility Managed. You can use the sectors to find and compare funds, for instance to look at performance and fund charges.

We divide the sectors into broad groups, each with a different investment focus: Growth, Income, Capital Protection, Specialist funds and those with an outcome intention. Some funds choose to remain Unclassified within the sectors.

Sectors are there to help you navigate around the large universe of funds in the UK and include some offshore (EU) funds and ETFs. 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. You may for example wish to compare performance, or charges. Funds within any single sector may still offer considerable variety, whether of investment approach (for example active vs passive) or choice of underlying instruments (such as large cap vs mid cap stocks).

The drop-down menu below will show you the definitions for each broad group or sector, or you can look at the sector schematic to see how all the sectors fit together.

Funds principally targeting capital protection

Short Term Money Market

Funds which invest their assets in money market instruments and comply with the definition of a ‘Short Term Money Market’ fund set out in the Money Market Fund Regulation - Regulation (EU) 2017/1131(MMFR).

Notes:

1. The MMFR specifies two common definitions for European Money Market Funds – “short term money market” funds and “standard money market” funds. [The MMFR replaces the previous requirements in the COLL Sourcebook (COLL 5.9) and the definitions in the CESR/10-049 guidelines.] The Investment Association definitions for Money Market funds follow the regulatory definitions which means that the number of funds in these sectors may be smaller than for other Investment Association sectors.
2. Funds that were admitted into the “short term money market” and “standard money market” before 21 July 2018 have until 21 March 2019 to confirm they have received the required authorisation applicable to their sectors under the MMFR.
3. Unlike in other IA sectors, funds will not be required to provide monitoring data or quarterly certification to Morningstar UK, The Investment Association's monitoring company, that they have complied with the rules for “short term money market” or “standard money market” funds set out in the MMFR. The regulatory rules and associated reputational risk from breaching the rules are deemed sufficient to assume compliance.
4. Each fund will be checked against the ESMA register or equivalent.
The IA will maintain a list that indicates whether a fund is a Public Debt Constant Net Asset Value MMF (Public Debt CNAV MMF), a low Volatility Net Asset Value MMF (LVNAV MMF) or a Variable Net Asset Value MMF (VNAV).
5. Firms are required to notify The Investment Association should there be a material rule breach. In the event of such a breach, The Investment Association may suspend the fund from the sector whilst the position is clarified. A material breach would occur if the daily or weekly liquidity thresholds are breached and a fund imposes fees and gates; or if the subscription or redemption price for a CNAV or LVNAV moves from a constant price to a mark-to market price6.

Standard Money Market

Funds which invest their assets in money market instruments and comply with the definition of a ‘Standard Money Market’ fund set out in the Money Market Fund Regulation - Regulation (EU) 2017/1131(MMFR).

Notes:

  1. The MMFR specifies two common definitions for European Money Market Funds – “short term money market” funds and “standard money market” funds. [The MMFR replaces the previous requirements for money market funds in the COLL Sourcebook (COLL 5.9) and the definitions in the CESR/10-049 guidelines.] The Investment Association definitions for Money Market funds follow the regulatory definitions which means that the number of funds in these sectors may be smaller than for other Investment Association sectors.
  2. Funds that were admitted into the “short term money market” and “standard money market” before 21 July 2018 have until 21 March 2019 to confirm they have received the required authorisation applicable to their sectors under the MMFR.
  3. Unlike in other IA sectors, funds will not be required to provide monitoring data or quarterly certification to Morningstar UK, The Investment Association's monitoring company, that they have complied with the rules for “short term money market” or “standard money market” funds set out in the MMFR. The regulatory rules and associated reputational risk from breaching the rules are deemed sufficient to assume compliance.
  4. Each fund will be checked against the ESMA register or equivalent.
  5. Firms are required to notify The Investment Association should there be a material rule breach. In the event of such a breach, The Investment Association may suspend the fund from the sector whilst the position is clarified. A material breach would occur if the daily or weekly liquidity thresholds are breached and a fund imposes fees and gates.

Funds principally targeting income (by asset category)

Fixed Income Sectors

UK Gilts

Funds which invest at least 95% of their assets in Sterling denominated (or hedged back to Sterling) government backed securities, with a rating the same or higher than that of the UK, with at least 80% invested in UK government securities (Gilts).

Notes:

  1. The core 80% in the UK Gilts sector should include only UK conventional Gilts not UK Index Linked Gilts.
  2. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  3. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  4. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  5. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  6. Funds in bond sectors that include “Global” in their title may choose to have their primary share class either as a GBP hedged share class or an unhedged share class because the sector is already diverse by bond type and currency exposure. However, to qualify for a sector labelled either “USD” or “EUR” the funds should primarily invest in assets denominated in US Dollar or Euros, not hedged back to that currency. The main driver of returns should be the underlying holdings not the currency of the primary share class. In the sectors labelled “USD” or “EUR”, GBP hedged funds have been moved to the Specialist Bond sector.
  7.  Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  8. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  9. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of  the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  10. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

 

UK Index Linked Gilts

Funds which invest at least 95% of their assets in Sterling denominated (or hedged back to Sterling) government backed index linked securities, with a rating the same or higher than that of the UK, with at least 80% invested in UK Index Linked Gilts.

Notes:

  1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  2. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  3. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  4. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  5. Funds in bond sectors that include “Global” in their title may choose to have their primary share class either as a GBP hedged share class or an unhedged share class because the sector is already diverse by bond type and currency exposure. However, to qualify for a sector labelled either “USD” or “EUR” the funds should primarily invest in assets denominated in US Dollar or Euros, not hedged back to that currency. The main driver of returns should be the underlying holdings not the currency of the primary share class. In the sectors labelled “USD” or “EUR”, GBP hedged funds have been moved to the Specialist Bond sector.
  6.  Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  7. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  8. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of  the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  9. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

 

Sterling Corporate Bond

Funds which invest at least 80% of their assets in Sterling denominated (or hedged back to Sterling), Triple BBB minus or above corporate bond securities.

Notes:

  1. Investment in supranational debt and government backed debt is counted towards the core 80% for “corporate” assets. Investment in Gilts and non-UK sovereign debt is not.
  2. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  3. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  4. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  5. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  6. Funds in bond sectors that include “Global” in their title may choose to have their primary share class either as a GBP hedged share class or an unhedged share class because the sector is already diverse by bond type and currency exposure. However, to qualify for a sector labelled either “USD” or “EUR” the funds should primarily invest in assets denominated in US Dollar or Euros, not hedged back to that currency. The main driver of returns should be the underlying holdings not the currency of the primary share class. In the sectors labelled “USD” or “EUR”, GBP hedged funds have been moved to the Specialist Bond sector.
  7.  Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  8. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  9. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of  the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  10. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

 

Sterling Strategic Bond

Funds which invest at least 80% of their assets in Sterling denominated (or hedged back to Sterling) fixed interest securities. At any point in time the asset allocation of these funds could theoretically place the fund in one of the other Fixed Interest sectors. The funds will remain in this sector on these occasions since it is the Manager's stated intention to retain the right to invest across the Sterling fixed interest credit risk spectrum.

Notes:

  1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  2. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  3. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  4. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  5. Funds in bond sectors that include “Global” in their title may choose to have their primary share class either as a GBP hedged share class or an unhedged share class because the sector is already diverse by bond type and currency exposure. However, to qualify for a sector labelled either “USD” or “EUR” the funds should primarily invest in assets denominated in US Dollar or Euros, not hedged back to that currency. The main driver of returns should be the underlying holdings not the currency of the primary share class. In the sectors labelled “USD” or “EUR”, GBP hedged funds have been moved to the Specialist Bond sector.
  6.  Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  7. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  8. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of  the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  9. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

 

Sterling High Yield

Funds which invest at least 80% of their assets in Sterling denominated (or hedged back to Sterling) below BBB minus fixed interest securities.

Notes:

  1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  2. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  3. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  4. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  5. Funds in bond sectors that include “Global” in their title may choose to have their primary share class either as a GBP hedged share class or an unhedged share class because the sector is already diverse by bond type and currency exposure. However, to qualify for a sector labelled either “USD” or “EUR” the funds should primarily invest in assets denominated in US Dollar or Euros, not hedged back to that currency. The main driver of returns should be the underlying holdings not the currency of the primary share class. In the sectors labelled “USD” or “EUR”, GBP hedged funds have been moved to the Specialist Bond sector.
  6.  Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  7. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  8. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  9. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

 

USD Government Bond

Funds which invest at least 80% of their assets in USD denominated Government bonds (issued or explicitly guaranteed by the US government). 

Notes:

  1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  2. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  3. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  4. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  5. Funds in bond sectors that include “Global” in their title may choose to have their primary share class either as a GBP hedged share class or an unhedged share class because the sector is already diverse by bond type and currency exposure. However, to qualify for a sector labelled either “USD” or “EUR” the funds should primarily invest in assets denominated in US Dollar or Euros, not hedged back to that currency. The main driver of returns should be the underlying holdings not the currency of the primary share class. In the sectors labelled “USD” or “EUR”, GBP hedged funds have been moved to the Specialist Bond sector.
  6. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  7. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  8. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  9. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

EUR Government Bond

Funds which invest at least 80% of their assets in EUR denominated Government bonds (issued or explicitly guaranteed by European governments). 

Notes:

  1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  2. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  3. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  4. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  5. Funds in bond sectors that include “Global” in their title may choose to have their primary share class either as a GBP hedged share class or an unhedged share class because the sector is already diverse by bond type and currency exposure. However, to qualify for a sector labelled either “USD” or “EUR” the funds should primarily invest in assets denominated in US Dollar or Euros, not hedged back to that currency. The main driver of returns should be the underlying holdings not the currency of the primary share class. In the sectors labelled “USD” or “EUR”, GBP hedged funds have been moved to the Specialist Bond sector.
  6. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  7. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  8. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  9. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

Global Government Bond

Funds which invest at least 80% of their assets in a diversified portfolio of Government backed securities from around the world in a variety of currencies. 

Notes:

  1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  2. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  3. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  4. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  5. Funds in bond sectors that include “Global” in their title may choose to have their primary share class either as a GBP hedged share class or an unhedged share class because the sector is already diverse by bond type and currency exposure. However, to qualify for a sector labelled either “USD” or “EUR” the funds should primarily invest in assets denominated in US Dollar or Euros, not hedged back to that currency. The main driver of returns should be the underlying holdings not the currency of the primary share class. In the sectors labelled “USD” or “EUR”, GBP hedged funds have been moved to the Specialist Bond sector.
  6. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  7. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  8. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  9. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

Global Inflation Linked Bond

Funds which invest at least 80% of their assets in a diversified portfolio of inflation linked bond securities from around the world in a variety of issuers and currencies. 

Notes:

  1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  2. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  3. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  4. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  5. Funds in bond sectors that include “Global” in their title may choose to have their primary share class either as a GBP hedged share class or an unhedged share class because the sector is already diverse by bond type and currency exposure. However, to qualify for a sector labelled either “USD” or “EUR” the funds should primarily invest in assets denominated in US Dollar or Euros, not hedged back to that currency. The main driver of returns should be the underlying holdings not the currency of the primary share class. In the sectors labelled “USD” or “EUR”, GBP hedged funds have been moved to the Specialist Bond sector.
  6. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  7. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  8. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  9. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

USD Corporate Bond

Funds which invest at least 80% of their assets in US Dollar denominated, triple BBB minus or above corporate bond securities. 

Notes:

  1. Investment in supranational debt and government backed debt is counted towards the core 80% for “corporate” assets. Investment in Government debt is not.
  2. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  3. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  4. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  5. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  6. Funds in bond sectors that include “Global” in their title may choose to have their primary share class either as a GBP hedged share class or an unhedged share class because the sector is already diverse by bond type and currency exposure. However, to qualify for a sector labelled either “USD” or “EUR” the funds should primarily invest in assets denominated in US Dollar or Euros, not hedged back to that currency. The main driver of returns should be the underlying holdings not the currency of the primary share class. In the sectors labelled “USD” or “EUR”, GBP hedged funds have been moved to the Specialist Bond sector.
  7. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  8. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  9. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  10. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

EUR Corporate Bond

Funds which invest at least 80% of their assets in EUR denominated, triple BBB minus or above corporate bond securities. 

Notes:

  1. Investment in supranational debt and government backed debt is counted towards the core 80% for “corporate” assets. Investment in Government debt is not.
  2. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  3. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  4. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  5. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  6. Funds in bond sectors that include “Global” in their title may choose to have their primary share class either as a GBP hedged share class or an unhedged share class because the sector is already diverse by bond type and currency exposure. However, to qualify for a sector labelled either “USD” or “EUR” the funds should primarily invest in assets denominated in US Dollar or Euros, not hedged back to that currency. The main driver of returns should be the underlying holdings not the currency of the primary share class. In the sectors labelled “USD” or “EUR”, GBP hedged funds have been moved to the Specialist Bond sector.
  7. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  8. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  9. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  10. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

Global Corporate Bond

Funds which invest at least 80% of their assets in a diversified portfolio of triple BBB minus or above corporate bond securities from around the world in a variety of currencies. 

Notes:

  1. Investment in supranational debt and government backed debt is counted towards the core 80% for “corporate” assets. Investment in Government debt is not.
  2. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  3. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  4. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  5. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  6. Funds in bond sectors that include “Global” in their title may choose to have their primary share class either as a GBP hedged share class or an unhedged share class because the sector is already diverse by bond type and currency exposure. However, to qualify for a sector labelled either “USD” or “EUR” the funds should primarily invest in assets denominated in US Dollar or Euros, not hedged back to that currency. The main driver of returns should be the underlying holdings not the currency of the primary share class. In the sectors labelled “USD” or “EUR”, GBP hedged funds have been moved to the Specialist Bond sector.
  7. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  8. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  9. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  10. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

USD Mixed Bond

Funds which invest at least 80% of their assets in USD denominated bond securities. A fund may invest in a broad mix of USD denominated bonds across the bond credit and type spectrum. This may involve a significant degree of flexibility. At any point in time, the asset allocation could theoretically place the fund in one of the other USD bond sectors. The fund will remain in this sector on these occasions since it is the Manager’s stated intention to retain the right to invest across the USD bond credit and type spectrum. 

Notes:

  1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  2. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  3. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  4. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  5. Funds in bond sectors that include “Global” in their title may choose to have their primary share class either as a GBP hedged share class or an unhedged share class because the sector is already diverse by bond type and currency exposure. However, to qualify for a sector labelled either “USD” or “EUR” the funds should primarily invest in assets denominated in US Dollar or Euros, not hedged back to that currency. The main driver of returns should be the underlying holdings not the currency of the primary share class. In the sectors labelled “USD” or “EUR”, GBP hedged funds have been moved to the Specialist Bond sector.
  6. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  7. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  8. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  9. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

EUR Mixed Bond

Funds which invest at least 80% of their assets in EUR denominated bond securities. A fund may invest in a broad mix of EUR denominated bonds across the bond credit and type spectrum. This may involve a significant degree of flexibility. At any point in time, the asset allocation could theoretically place the fund in one of the other EUR bond sectors. The fund will remain in this sector on these occasions since it is the Manager’s stated intention to retain the right to invest across the EUR bond credit and type spectrum. 

Notes:

  1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  2. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  3. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  4. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  5. Funds in bond sectors that include “Global” in their title may choose to have their primary share class either as a GBP hedged share class or an unhedged share class because the sector is already diverse by bond type and currency exposure. However, to qualify for a sector labelled either “USD” or “EUR” the funds should primarily invest in assets denominated in US Dollar or Euros, not hedged back to that currency. The main driver of returns should be the underlying holdings not the currency of the primary share class. In the sectors labelled “USD” or “EUR”, GBP hedged funds have been moved to the Specialist Bond sector.
  6. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  7. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  8. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  9. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

Global Mixed Bond

Funds which invest at least 80% of their assets in bond securities. A fund may invest in a broad mix of bonds across the bond credit, type and/or currency spectrum. This may involve a significant degree of flexibility. At any point in time, the asset allocation could theoretically place the fund in one of the other Global bond sectors or the USD or EUR bond sectors. The fund will remain in this sector on these occasions since it is the Manager’s stated intention to retain the right to invest across the bond credit, type and currency. 

Notes:

  1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  2. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  3. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  4. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  5. Funds in bond sectors that include “Global” in their title may choose to have their primary share class either as a GBP hedged share class or an unhedged share class because the sector is already diverse by bond type and currency exposure. However, to qualify for a sector labelled either “USD” or “EUR” the funds should primarily invest in assets denominated in US Dollar or Euros, not hedged back to that currency. The main driver of returns should be the underlying holdings not the currency of the primary share class. In the sectors labelled “USD” or “EUR”, GBP hedged funds have been moved to the Specialist Bond sector.
  6. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  7. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  8. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  9. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

USD High Yield Bond

Funds which invest at least 80% of their assets in USD denominated, below BBB minus fixed income securities.

Notes:

  1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  2. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  3. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  4. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  5. Funds in bond sectors that include “Global” in their title may choose to have their primary share class either as a GBP hedged share class or an unhedged share class because the sector is already diverse by bond type and currency exposure. However, to qualify for a sector labelled either “USD” or “EUR” the funds should primarily invest in assets denominated in US Dollar or Euros, not hedged back to that currency. The main driver of returns should be the underlying holdings not the currency of the primary share class. In the sectors labelled “USD” or “EUR”, GBP hedged funds have been moved to the Specialist Bond sector.
  6. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  7. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  8. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  9. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

EUR High Yield Bond

Funds which invest at least 80% of their assets in EUR denominated, below BBB minus fixed income securities. 

Notes:

  1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  2. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  3. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  4. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  5. Funds in bond sectors that include “Global” in their title may choose to have their primary share class either as a GBP hedged share class or an unhedged share class because the sector is already diverse by bond type and currency exposure. However, to qualify for a sector labelled either “USD” or “EUR” the funds should primarily invest in assets denominated in US Dollar or Euros, not hedged back to that currency. The main driver of returns should be the underlying holdings not the currency of the primary share class. In the sectors labelled “USD” or “EUR”, GBP hedged funds have been moved to the Specialist Bond sector.
  6. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  7. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  8. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  9. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

Global High Yield Bond

Funds which invest at least 80% of their assets in a diversified portfolio of below BBB minus fixed income securities from around the world in a variety of issuers and currencies.  

Notes:

  1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  2. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  3. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  4. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  5. Funds in bond sectors that include “Global” in their title may choose to have their primary share class either as a GBP hedged share class or an unhedged share class because the sector is already diverse by bond type and currency exposure. However, to qualify for a sector labelled either “USD” or “EUR” the funds should primarily invest in assets denominated in US Dollar or Euros, not hedged back to that currency. The main driver of returns should be the underlying holdings not the currency of the primary share class. In the sectors labelled “USD” or “EUR”, GBP hedged funds have been moved to the Specialist Bond sector.
  6. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  7. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  8. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  9. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

Global Emerging Markets Bond - Hard Currency

Funds which invest at least 80% of their assets in emerging market bond issuers (country or corporate) as defined by a recognised Global Emerging Markets Bond index and denominated in a hard currency (or hedged back to a hard currency). Funds must be diversified without a country or regional focus.

Notes:

  1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  2. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  3. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  4. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  5.  Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  6. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  7. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  8. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.


Additional note:
Hard currency includes the following currencies: AUD, CAD, CHF, DKK, EUR, GBP, JPY, NOK, SEK, USD. 

Global Emerging Markets Bond - Local Currency

Funds which invest at least 80% of their assets in emerging market bond issuers (country or corporate) as defined by a recognised Global Emerging Markets Bond index and denominated in local currencies. Funds must be diversified without a country or regional focus.

Notes:

  1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  2. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  3. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  4. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  5.  Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  6. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  7. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  8. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

Global Emerging Markets Bond - Blended

Funds which invest at least 80% of their assets in emerging market bond issuers (country or corporate) as defined by a recognised Global Emerging Markets Bond index. Funds in this sector may have a hard or local currency bias at different points in time. Funds must be diversified without a country or regional focus.

Notes:

  1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  2. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  3. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  4. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  5.  Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  6. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  7. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  8. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

Equity Sectors

UK Equity Income

Funds which invest at least 80% in UK equities and which intend to achieve a historic yield on the distributable income in excess of 100% of the FTSE All Share yield at the fund's year end on a 3 year rolling basis and 90% on an annual basis.

Specific sector notes:

  1. To ensure compliance with the sector criteria, funds should supply data for monitoring to enable the calculation of historic yield based on The Investment Association guidelines set out in "Authorised Funds: Yield Calculation and Disclosure Guidelines - 2012".
  2. Funds are required to submit yield data at the fund’s year end to the sectors team at The Investment Association and to the monitoring company.
  3. To ensure compliance with the intended 100% yield, funds in the sector will be tested over 3 year rolling periods by taking a simple average of the yield figure achieved for each fund at its year end. Funds that fail to exceed the 100% average yield for each 3 year rolling period will be removed from the sector. (As an illustration, this would require a fund that delivered 90% in the first year and 100% in the second year to deliver a yield in excess of 110% in the third year, if it were to be allowed to remain in the sector).
  4. Annually, at the fund’s year-end, each fund in the sector must achieve a yield of not less than 90% of the FTSE All Share yield. Funds that fail to do so will be removed from the sector.
  5. The Investment Association will measure yield to one decimal place.
  6. To assist users of the sectors and aid comparison, The Investment Association will publish the annual yield achieved by each fund in the sector.


General notes:

  1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
  2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
  3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

 

Global Equity Income

Funds which invest at least 80% of their assets globally in equities. Funds must be diversified by geographic region and intend to achieve a historic yield on the distributable income in excess of 100% of the MSCI World Index yield at the fund’s year end on a 3 year rolling basis and 90% on an annual basis.

Specific sector notes:

  1. Funds must be diversified by geographic region.
  2. Funds which qualify for the Global Emerging Markets equity sector but also have an income bias will be excluded
  3. To ensure compliance with the sector criteria, funds should supply data for monitoring to enable the calculation of historic yield based on The Investment Association guidelines set out in "Authorised Funds: Yield Calculation and Disclosure Guidelines - 2012".
  4. Funds are required to submit yield data at the fund’s year end to the sector team at The Investment Association and to the monitoring company, Morningstar.
  5. To ensure compliance with the intended 100% yield, funds in the sector will be tested over 3 year rolling periods by taking a simple average of the yield figure achieved for each fund at its year end. Funds that fail to exceed the 100% average yield for each 3 year rolling period will be removed from the sector. (As an illustration, this would require a fund that delivered 90% in the first year and 100% in the second year to deliver a yield in excess of 110% in the third year, if it were to be allowed to remain in the sector.)
  6. Annually, at the fund’s year-end, each fund in the sector must achieve a yield of not less than 90% of the MSCI World Index yield. Funds that fail to do so will be removed from the sector.
  7. The Investment Association will measure yield to one decimal place.
  8. To assist users of the sectors and aid comparison, The Investment Association will publish the annual yield achieved by each fund in the sector.


General notes:

  1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
  2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
  3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
  4. Funds in the sector above should be broadly diversified within the relevant country, region or globally.
  5. The following policies will also apply:
    a. Funds that invest solely in a single country in a multi-currency region (for example a German/Korean fund) or regional emerging markets (e.g. emerging Europe/Asia) will be classified to the Specialist sector; the single country policy does not apply to funds investing in US equities, see definition for details.
    b. Thematic funds, market cap focused funds and industry focused funds may be classified to a regional equity sector as long as they are geographically diversified based on the relevant FTSE and MSCI index. Funds that fail to meet the geographic diversification criteria will be classified to the Specialist sector. Funds invested in technology or telecommunications equities are classified to the Technology & Telecommunications sector.
  6. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

 

Funds principally targeting growth (by asset category)

UK Equities

UK All Companies

Funds which invest at least 80% of their assets in UK equities which have a primary objective of achieving capital growth.

General notes:

  1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
  2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
  3. ETFs or funds that track the FTSE 250/mid cap indices may have a high exposure to listed investment trusts as a result of the weighting within their benchmark. On a strict application of the “look through” principle these funds may have insufficient weighting to UK equities but will remain in the sector. Investors should do their own due diligence to ensure that these funds meet their needs. 
  4. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

 

UK Smaller Companies

Funds which invest at least 80% of their assets in UK equities of companies which form the bottom 10% by market capitalisation.

Specific sector note:

The universe of eligible UK equities is constructed by the monitoring company and comprises all relevant securities available from the Morningstar database from which a market capitalisation cut-off is derived.

General notes:

  1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
  2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
  3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

 

Overseas equities

Japan

Funds which invest at least 80% of their assets in Japanese equities.

General notes:

  1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
  2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
  3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

 

Japanese Smaller Companies

Funds which invest at least 80% of their assets in Japanese equities of companies which form the bottom 30% by market capitalisation.

Specific sector note:

The universe of eligible equities is constructed by the monitoring company and comprises all relevant securities available from the Morningstar database from which a market capitalisation cut-off is derived.

General notes:

  1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
  2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
  3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

 

Asia Pacific including Japan

Funds which invest at least 80% of their assets in Asia Pacific equities including a Japanese content. The Japanese content must make up less than 80% of assets.

General notes:

  1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
  2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
  3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
  4. Funds in the sector above should be broadly diversified within the relevant country, region or globally.
  5. The following policies will also apply:
    a. Funds that invest solely in a single country in a multi-currency region (for example a German/Korean fund) or regional emerging markets (e.g. emerging Europe/Asia) will be classified to the Specialist sector; the single country policy does not apply to funds investing in US equities, see definition for details.
    b. Thematic funds, market cap focused funds and industry focused funds may be classified to a regional equity sector as long as they are geographically diversified based on the relevant FTSE and MSCI index. Funds that fail to meet the geographic diversification criteria will be classified to the Specialist sector. Funds invested in technology or telecommunications equities are classified to the Technology & Telecommunications sector.
  6. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

 

Asia Pacific excluding Japan

Funds which invest at least 80% of their assets in Asia Pacific equities and exclude Japanese securities.

Specific sector note:

Up to 5% (but no more than 5%) of the total assets of the fund can be invested in Japanese equities to allow flexibility for corporate actions, for example.

General notes:

  1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
  2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
  3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
  4. Funds in the sector above should be broadly diversified within the relevant country, region or globally.
  5. The following policies will also apply:
    a. Funds that invest solely in a single country in a multi-currency region (for example a German/Korean fund) or regional emerging markets (e.g. emerging Europe/Asia) will be classified to the Specialist sector; the single country policy does not apply to funds investing in US equities, see definition for details.
    b. Thematic funds, market cap focused funds and industry focused funds may be classified to a regional equity sector as long as they are geographically diversified based on the relevant FTSE and MSCI index. Funds that fail to meet the geographic diversification criteria will be classified to the Specialist sector. Funds invested in technology or telecommunications equities are classified to the Technology & Telecommunications sector.
  6. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

 

China\Greater China

Funds which invest at least 80% of their assets directly or indirectly in equities of the People's Republic of China, Hong Kong or Taiwan. Funds may invest solely in China or be diversified across Greater China.

Specific sector note:

Equity investment will be monitored by reference to companies listed on one or more of the stock exchanges of mainland China, Hong Kong or Taiwan.

Funds that invest solely in Taiwan or Hong Kong with the intention to gain specific exposure to these countries will be included in the Specialist sector.

General notes:

  1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
  2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
  3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
  4. Funds in the sector above should be broadly diversified within the relevant country, region or globally.
  5. The following policies will also apply:
    a. Funds that invest solely in a single country in a multi-currency region (for example a German/Korean fund) or regional emerging markets (e.g. emerging Europe/Asia) will be classified to the Specialist sector; the single country policy does not apply to funds investing in US equities, see definition for details.
    b. Thematic funds, market cap focused funds and industry focused funds may be classified to a regional equity sector as long as they are geographically diversified based on the relevant FTSE and MSCI index. Funds that fail to meet the geographic diversification criteria will be classified to the Specialist sector. Funds invested in technology or telecommunications equities are classified to the Technology & Telecommunications sector.
  6. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

 

North America

Funds which invest at least 80% of their assets in North American equities.

Specific sector note:

A fund that invests solely in Canada will be classified to the Specialist sector as it is not sufficiently diversified to qualify as a North American fund; conversely a US focused fund may be classified to the North America sector as it can be expected to be sufficiently diversified.

General notes:

  1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
  2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
  3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
  4. Funds in the sector above should be broadly diversified within the relevant country, region or globally.
  5. The following policies will also apply:
    a. Funds that invest solely in a single country in a multi-currency region (for example a German/Korean fund) or regional emerging markets (e.g. emerging Europe/Asia) will be classified to the Specialist sector; the single country policy does not apply to funds investing in US equities, see definition for details.
    b. Thematic funds, market cap focused funds and industry focused funds may be classified to a regional equity sector as long as they are geographically diversified based on the relevant FTSE and MSCI index. Funds that fail to meet the geographic diversification criteria will be classified to the Specialist sector. Funds invested in technology or telecommunications equities are classified to the Technology & Telecommunications sector.
  6. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

 

North American Smaller Companies

Funds which invest at least 80% of their assets in North American equities of companies which form the bottom 20% by market capitalisation.

Specific sector note:

The universe of eligible equities is constructed by the monitoring company and comprises all relevant securities available from the Morningstar database from which a market capitalisation cut-off is derived.

General notes:

  1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
  2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
  3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
  4. Funds in the sector above should be broadly diversified within the relevant country, region or globally.
  5. The following policies will also apply:
    a. Funds that invest solely in a single country in a multi-currency region (for example a German/Korean fund) or regional emerging markets (e.g. emerging Europe/Asia) will be classified to the Specialist sector; the single country policy does not apply to funds investing in US equities, see definition for details.
    b. Thematic funds, market cap focused funds and industry focused funds may be classified to a regional equity sector as long as they are geographically diversified based on the relevant FTSE and MSCI index. Funds that fail to meet the geographic diversification criteria will be classified to the Specialist sector. Funds invested in technology or telecommunications equities are classified to the Technology & Telecommunications sector.
  6. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

 

Europe including UK

Funds which invest at least 80% of their assets in European equities. They may include UK equities, but these must not exceed 80% of the fund's assets.

General notes:

  1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
  2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
  3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
  4. Funds in the sector above should be broadly diversified within the relevant country, region or globally.
  5. The following policies will also apply:
    a. Funds that invest solely in a single country in a multi-currency region (for example a German/Korean fund) or regional emerging markets (e.g. emerging Europe/Asia) will be classified to the Specialist sector; the single country policy does not apply to funds investing in US equities, see definition for details.
    b. Thematic funds, market cap focused funds and industry focused funds may be classified to a regional equity sector as long as they are geographically diversified based on the relevant FTSE and MSCI index. Funds that fail to meet the geographic diversification criteria will be classified to the Specialist sector. Funds invested in technology or telecommunications equities are classified to the Technology & Telecommunications sector.
  6. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

 

Europe excluding UK

Funds which invest at least 80% of their assets in European equities and exclude UK securities.

Specific sector note:

Up to 5% (but no more than 5%) of the total assets of the fund can be invested in UK equities to allow flexibility for corporate actions, for example.

General notes:

  1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
  2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
  3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
  4. Funds in the sector above should be broadly diversified within the relevant country, region or globally.
  5. The following policies will also apply:
    a. Funds that invest solely in a single country in a multi-currency region (for example a German/Korean fund) or regional emerging markets (e.g. emerging Europe/Asia) will be classified to the Specialist sector; the single country policy does not apply to funds investing in US equities, see definition for details.
    b. Thematic funds, market cap focused funds and industry focused funds may be classified to a regional equity sector as long as they are geographically diversified based on the relevant FTSE and MSCI index. Funds that fail to meet the geographic diversification criteria will be classified to the Specialist sector. Funds invested in technology or telecommunications equities are classified to the Technology & Telecommunications sector.
  6. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

 

European Smaller Companies

Funds which invest at least 80% of their assets in European equities of companies which form the bottom 20% by market capitalisation in the European market. They may include UK equities, but these must not exceed 80% of the fund's assets. (‘Europe' includes all countries in the MSCI/FTSE pan European indices.)

Specific sector notes:

The universe of eligible equities is constructed by the monitoring company and comprises all relevant securities available from the Morningstar database from which a market capitalisation cut-off is derived.

General notes:

  1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
  2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
  3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
  4. Funds in the sector above should be broadly diversified within the relevant country, region or globally.
  5. The following policies will also apply:
    a. Funds that invest solely in a single country in a multi-currency region (for example a German/Korean fund) or regional emerging markets (e.g. emerging Europe/Asia) will be classified to the Specialist sector; the single country policy does not apply to funds investing in US equities, see definition for details.
    b. Thematic funds, market cap focused funds and industry focused funds may be classified to a regional equity sector as long as they are geographically diversified based on the relevant FTSE and MSCI index. Funds that fail to meet the geographic diversification criteria will be classified to the Specialist sector. Funds invested in technology or telecommunications equities are classified to the Technology & Telecommunications sector.
  6. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

 

Global

Funds which invest at least 80% of their assets globally in equities. Funds must be diversified by geographic region.

Specific sector notes:

  1. The main focus of funds which elect to be classified to this sector should be geographic diversification.
  2. Funds which qualify for a UK, regional or the Global Emerging Markets equity sector will be excluded.
  3. Funds may elect to be classified to the Global sector on the basis of geographic diversification even where a style or thematic bias exists - for example Global Consumer funds, Global Climate Change funds, Global Income funds, Global Smaller Companies funds.
  4. Global funds which focus solely on a single industry sector may also elect to be classified to the Global sector, subject to maintaining geographic diversification - for example all types of Global Commodity funds (Agriculture/ Resources/Gold), Global Financials, Global Pharmaceuticals fund.

General notes:

  1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
  2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
  3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
  4. Funds in the sector above should be broadly diversified within the relevant country, region or globally.
  5. The following policies will also apply:
    a. Funds that invest solely in a single country in a multi-currency region (for example a German/Korean fund) or regional emerging markets (e.g. emerging Europe/Asia) will be classified to the Specialist sector; the single country policy does not apply to funds investing in US equities, see definition for details.
    b. Thematic funds, market cap focused funds and industry focused funds may be classified to a regional equity sector as long as they are geographically diversified based on the relevant FTSE and MSCI index. Funds that fail to meet the geographic diversification criteria will be classified to the Specialist sector. Funds invested in technology or telecommunications equities are classified to the Technology & Telecommunications sector.
  6. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

 

Global Emerging Markets

Funds which invest 80% or more of their assets in equities from emerging market countries as defined by the relevant FTSE or MSCI Emerging Markets and Frontier indices. The maximum frontier equity exposure is restricted to 20% of the total fund.

Specific sector notes:

  1. Funds which invest solely in frontier markets or regional emerging markets (e.g. emerging Europe) are included in the Specialist sector.
  2. Shares of companies whose business is predominantly based in emerging markets but which are listed on exchanges in developed markets will not be included as core emerging market assets (i.e. in the 80%) but can be held as non-core assets (i.e. in the 20%).

General notes:

  1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
  2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
  3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
  4. Funds in the sector above should be broadly diversified within the relevant country, region or globally.
  5. The following policies will also apply:
    a. Funds that invest solely in a single country in a multi-currency region (for example a German/Korean fund) or regional emerging markets (e.g. emerging Europe/Asia) will be classified to the Specialist sector; the single country policy does not apply to funds investing in US equities, see definition for details.
    b. Thematic funds, market cap focused funds and industry focused funds may be classified to a regional equity sector as long as they are geographically diversified based on the relevant FTSE and MSCI index. Funds that fail to meet the geographic diversification criteria will be classified to the Specialist sector. Funds invested in technology or telecommunications equities are classified to the Technology & Telecommunications sector.
  6. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

 

Mixed Asset

Mixed Investment 0-35% Shares

 Funds in this sector are required to have a range of different investments. Up to 35% of the fund can be invested in company shares (equities). At least 45% of the fund must be in fixed income investments (for example, corporate and government bonds) and/or “cash” investments. “Cash” can include investments such as current account cash, short-term fixed income investments and certificates of deposit.

  • Maximum 35% equity exposure (including convertibles)
  • No minimum equity requirement
  • Minimum 45% investment grade fixed income and cash
  • Minimum 80% investment in established market currencies (US Dollar, Sterling & Euro) of which 40% must be Sterling
  • Sterling requirement includes assets hedged back to Sterling

General notes:

  1. At any one time the asset allocation of a fund in these sectors (particularly the Flexible Investment sector) may mean that the fund meets the requirements of more than one sector. The fund would remain in the elected sector on these occasions, but subject to complying with these notes.
  2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
  3. In order to clarify the treatment of property when monitoring equity limits in the Mixed Investment sectors, it is proposed that the following guidelines should be adhered to:
    A. Holdings in quoted property companies which may take the form of REITs (e.g. British Land, Land Securities) - treat as equity.
    B. Holdings in Closed End Property Funds (CEFs) - treat based on a “look through” to the holdings of the underlying fund. If  the underlying fund invests exclusively in direct property, treat as property; if the underlying holdings of the property CEF consist of property companies as per A. (above), treat as equity. Where there is a mixture of direct property and equity, treat each according to its weighting in the fund.   
    C. Holdings in Open Ended Property Funds - treat as per B. (above).
  4. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions. Decisions will be made by the ABI Investment Classification Committee or the Investment Association Sectors Committee and will be accepted as a peer group decision by funds in the sectors.

Mixed Investment 20-60% Shares

Funds in this sector are required to have a range of different investments. The fund must have between 20% and 60% invested in company shares (equities). At least 30% of the fund must be in fixed income investments (for example, corporate and government bonds) and/or “cash” investments. “Cash” can include investments such as current account cash, short-term fixed income investments and certificates of deposit.

  • Maximum 60% equity exposure (including convertibles)
  • Minimum 20% equity exposure
  • Minimum 30% fixed income and cash
  • Minimum 60% investment in established market currencies (US Dollar, Sterling & Euro) of which 30% must be Sterling
  • Sterling requirement includes assets hedged back to Sterling

General notes:

  1. At any one time the asset allocation of a fund in these sectors (particularly the Flexible Investment sector) may mean that the fund meets the requirements of more than one sector. The fund would remain in the elected sector on these occasions, but subject to complying with these notes.
  2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
  3. In order to clarify the treatment of property when monitoring equity limits in the Mixed Investment sectors, it is proposed that the following guidelines should be adhered to:
    A. Holdings in quoted property companies which may take the form of REITs (e.g. British Land, Land Securities) - treat as equity.
    B. Holdings in Closed End Property Funds (CEFs) - treat based on a “look through” to the holdings of the underlying fund. If  the underlying fund invests exclusively in direct property, treat as property; if the underlying holdings of the property CEF consist of property companies as per A. (above), treat as equity. Where there is a mixture of direct property and equity, treat each according to its weighting in the fund.   
    C. Holdings in Open Ended Property Funds - treat as per B. (above).
  4. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions. Decisions will be made by the ABI Investment Classification Committee or the Investment Association Sectors Committee and will be accepted as a peer group decision by funds in the sectors.

Mixed Investment 40-85% Shares

 Funds in this sector are required to have a range of different investments. However, there is scope for funds to have a high proportion in company shares (equities). The fund must have between 40% and 85% invested in company shares.

  • Maximum 85% equity exposure (including convertibles)
  • Minimum 40% equity exposure
  • No minimum fixed income or cash requirement
  • Minimum 50% investment in established market currencies (US Dollar, Sterling & Euro) of which 25% must be Sterling
  • Sterling requirement includes assets hedged back to Sterling

General notes:

  1. At any one time the asset allocation of a fund in these sectors (particularly the Flexible Investment sector) may mean that the fund meets the requirements of more than one sector. The fund would remain in the elected sector on these occasions, but subject to complying with these notes.
  2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
  3. In order to clarify the treatment of property when monitoring equity limits in the Mixed Investment sectors, it is proposed that the following guidelines should be adhered to:
    A. Holdings in quoted property companies which may take the form of REITs (e.g. British Land, Land Securities) - treat as equity.
    B. Holdings in Closed End Property Funds (CEFs) - treat based on a “look through” to the holdings of the underlying fund. If  the underlying fund invests exclusively in direct property, treat as property; if the underlying holdings of the property CEF consist of property companies as per A. (above), treat as equity. Where there is a mixture of direct property and equity, treat each according to its weighting in the fund.   
    C. Holdings in Open Ended Property Funds - treat as per B. (above).
  4. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions. Decisions will be made by the ABI Investment Classification Committee or the Investment Association Sectors Committee and will be accepted as a peer group decision by funds in the sectors.

Flexible Investment

The funds in this sector are expected to have a range of different investments. However, the fund manager has significant flexibility over what to invest in. There is no minimum or maximum requirement for investment in company shares (equities) and there is scope for funds to have a high proportion of shares.

The manager is accorded a significant degree of discretion over asset allocation and is allowed to invest up to 100% in equities at their discretion.

  • No minimum equity requirement
  • No minimum fixed income or cash requirement
  • No minimum currency requirement

General notes:

  1. At any one time the asset allocation of a fund in these sectors (particularly the Flexible Investment sector) may mean that the fund meets the requirements of more than one sector. The fund would remain in the elected sector on these occasions, but subject to complying with these notes.
  2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
  3. In order to clarify the treatment of property when monitoring equity limits in the Mixed Investment sectors, it is proposed that the following guidelines should be adhered to:
    A. Holdings in quoted property companies which may take the form of REITs (e.g. British Land, Land Securities) - treat as equity.
    B. Holdings in Closed End Property Funds (CEFs) - treat based on a “look through” to the holdings of the underlying fund. If  the underlying fund invests exclusively in direct property, treat as property; if the underlying holdings of the property CEF consist of property companies as per A. (above), treat as equity. Where there is a mixture of direct property and equity, treat each according to its weighting in the fund.   
    C. Holdings in Open Ended Property Funds - treat as per B. (above).
  4. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions. Decisions will be made by the ABI Investment Classification Committee or the Investment Association Sectors Committee and will be accepted as a peer group decision by funds in the sectors.

Specialist funds

UK Direct Property

Funds which invest an average of at least 70% of their assets directly in UK property over 5 year rolling periods.

Funds will be monitored and those that invest less than 70% of their assets in direct property for any continuous 12 month period or fall below 60% for any month may be removed from the sector.

Notes:

  1. UK property is defined as real estate located within the UK.
  2. Funds that fail any of the criteria may be removed from the sector.
  3. Funds investing directly in UK property should be balanced[1] funds which generally hold a wide mix of property assets, diversified by type and location. Specialist property funds which focus on specific types of property or on properties within particular geographic regions will be included in the Property Other sector.
  4. Investment in property bricks and mortar can be less liquid than in other asset classes. Investors should satisfy themselves that they understand what any given fund is doing and take account of any liquidity risks set out in a fund’s literature.
  5. If regulation does not set out rules, the Investment Association expect that member firms will follow good practice guidelines when using techniques to value property assets.
  6. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector.
  7. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are, in practice, broad definitions.
  8. Newly launched property funds which are intending to invest directly in physical property will be permitted a period of 12 months to come into compliance with the sector definition. The funds will be asked to make an appropriate commitment at the outset to the Investment Association.
  9. Where firms operate a Master-Feeder structure both funds will be classified to the UK Direct Property sector. This may create double counting in both the Investment Association sector averages and rankings if the Master and Feeders are included in the calculations. In this area, Investment Association guidance is that the Feeders should not be included in the calculations. If they are, this should be clearly signalled by data providers to their clients and by firms to their investors.

[1] Funds are deemed to be either Balanced or Specialist depending mainly on their investor mandates but also with regard to the current composition of their portfolios. In general,

a. funds will be deemed as Balanced providing that their holdings of either office, retail, industrial or ‘other property’ account for no more than 70% of their portfolio, and

b. they are also diversified geographically so that no more than 70% of their portfolio is located in any one of the following regions: Central London (comprising the City, mid-town and the West End), Inner London, Outer London, South East, South West, Eastern, East Midlands, West Midlands, Yorkshire & Humberside, North East, North West,Scotland, Wales, Northern Ireland, Offshore UK (Channel Islands & Isle of Man).

“Portfolio” means the gross asset value of the fund, including cash and other investments.

 

Property Other

Funds which predominantly invest in property and do not meet the requirements of the UK Direct Property sector. In order to invest "predominantly" in property that is not UK direct property, funds:

  • invest an average of at least 70% of their assets directly in property over 5 year rolling periods but do not meet the requirements of the UK Direct Property sector; or
  • invest at least 80% of their assets in property securities; or
  • invest at least 80% in a mixture of direct property and property securities

Notes:

  1. Funds will be flagged as "Direct Property funds", "Property Securities funds" or “Hybrid” funds respectively. The Investment Association will publish this information on its website.
  2. Direct property funds should invest 70% of their assets directly in property over rolling 5 year periods. Funds will be monitored and those that invest less than 70% of their assets in direct property for any continuous 12 month period or fall below 60% for any month may be removed from the sector.
  3. Funds that fail any of the criteria may be removed from the sector.
  4. Property securities are admissible assets within the investment limits indicated if included in an appropriate, independently constructed index.
  5. Property securities held within the 80% limit are intended to be equities, not property bonds (debt securities). 
  6. The Investment Association expect that member firms will follow good practice guidelines when using techniques to value property assets.
  7. Newly launched property funds which are intending to invest directly in physical property will be permitted a period of 12 months to come into compliance with the sector definition. The funds will be asked to make an appropriate commitment at the outset to the Investment Association.
  8. Where firms operate a Master-Feeder structure both funds will be classified to the Property Other sector. This may create double counting in both the Investment Association sector averages and rankings if the Master and Feeders are included in the calculations. In this area, Investment Association guidance is that the Feeders should not be included in the calculations. If they are, this should be clearly signalled by data providers to their clients and by firms to their investors.
  9. The sector includes a wide range of funds which may be investing directly or indirectly in property. For this reason, performance comparisons across the whole sector are inappropriate.

 

Specialist

Funds that have an investment universe that is not accommodated by the mainstream sectors. Performance ranking of funds within the sector as a whole is inappropriate, given the diverse nature of its constituents.

Specialist Bond

Funds that invest at least 80% in bond securities but which do not qualify for inclusion in any of the other IA Bond sectors. 

Notes:

  1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
  2. Convertibles, preference shares and permanent interest-bearing shares (PIBs) are excluded from core holdings in bond sectors, with the exception of the Specialist Bond sector.
  3. Credit ratings are measured by Standard & Poor’s or an equivalent external rating agency. 
  4. Unrated bonds can only be included in the 80% core holdings for the £ Strategic Bond, Global, USD and EUR Mixed Bond sectors, the £ High Yield Bond, Global, USD and EUR High Yield sectors, GEM Bond sectors and the Specialist Bond sector.
  5. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
  6. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
  7. Investment in all types of Asset Backed Securities (ABS) is not allowed in the core holdings of the government bond sectors It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist Bond sector.
  8. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

Technology & Telecommunications

Funds which invest at least 80% of their assets in technology and telecommunications sectors as defined by major index providers.

Unclassified

Unclassified

Funds which do not want to be classified into other Investment Association sectors such as private funds or funds which have been removed from other Investment Association sectors due to non compliance.

The Investment Association collects static data on these funds and they contribute to the assets and flows data provided in the Investment Association monthly statistics.

Funds principally targeting an outcome

Targeted Absolute Return

Funds managed with the aim of delivering positive returns in any market conditions, but returns are not guaranteed.
Funds in this sector may aim to achieve a return that is more demanding than a “greater than zero after fees objective.”

Funds in this sector must clearly state the timeframe over which they aim to meet their stated objective to allow the Investment Association and investors to make a distinction between funds on this basis. The timeframe must not be longer than three years.


Notes:

  1. The sector includes a wide range of different types of fund targeting a positive return in any market conditions. Asset selection is at the discretion of the manager. Funds will employ diverse investment strategies designed to deliver a variety of outcomes, and will often use derivatives within the investment process. Amongst other things funds may use different benchmarks, manage to different timeframes and present different risk characteristics. For these reasons, performance comparisons across the whole sector are inappropriate.
  2. Investors should satisfy themselves that they understand what any given fund is doing – and take advice if they are not sure. The Investment Association provides additional information through its website on each fund in the sector. This is intended to assist investors to narrow down the broad universe of funds in the sector by applying search filters of their own choosing, including timeframe.
  3. Returns are made in the base currency of the fund. Investors may be subject to currency losses should the base currency of a fund be different to their domiciled/invested currency. Currently, only funds that are trying to achieve a return in Sterling may be classified to the sector.
  4. Subject to satisfactory compliance with the sector definition, funds are classified to and remain in the sector on the basis of self-election by firms. It is the responsibility of the firm to ensure that any funds in the sector are correctly classified and not better suited to another sector. The determination that firms should apply is that any fund in the sector should be more like-for-like with the objectives set out in the definition than they would be in any other sector.
  5. The Sectors Committee retains the right to move funds that appear to be incorrectly classified.
  6. In a figure that will be refreshed monthly, the Investment Association will record on its website how many times over the preceding 24 months, a fund has failed to deliver a positive return over rolling 12 month periods. [For funds that do not have the 36 month track record necessary, the figure will show how many rolling 12 month periods have failed to deliver a positive return since launch and the total number of months since launch when a figure could be calculated].
  7.  The Investment Association will monitor the sector closely with a view to: Determining whether groupings of funds with sufficient communality of objective and timeframe are large enough to merit the creation of sub-sectors where sub-sector performance comparisons and averages may be appropriate; Determining whether there should be rules that lead to the exclusion of funds from the sector on historic performance grounds.

 

Volatility Managed

Funds whose objective is to manage their returns within specified volatility* parameters. Outcomes are not guaranteed.

Timeframes and methodologies for management of volatility may vary from fund to fund.

*definition of volatility – volatility is one type of risk. It is a measure of the ups and downs of performance of a fund. The higher the volatility, the more uncertainty there is in the returns.


Specific sector notes:

  1. The sector includes a wide range of funds managing their returns within specified volatility parameters. A fund may form part of a suite of other funds which operate across a risk spectrum set out in terms of volatility. Asset selection is at the discretion of the manager. Funds will employ diverse investment strategies designed to deliver a variety of outcomes, and will often use derivatives within the investment process. Amongst other things funds may use different benchmarks, manage to different timeframes and present different risk characteristics. For these reasons, performance comparisons across the whole sector are invalid and it is recommended that these should not be made.
     
  2. Investors should satisfy themselves that they understand what any given fund is doing – and take advice if they are not sure. Some funds may only be available to professional investors or through an adviser. Investors are responsible for their own due diligence.
     
  3. Subject to satisfactory compliance with the sector definition, funds are classified to and remain in the sector on the basis of self-election by firms. It is the responsibility of the firm to ensure that any funds in the sector are correctly classified and not better suited to another sector. The determination that firms should apply is that any fund in the sector should be more like-for-like with the objectives set out in the definition than they would be in any other sector.
     
  4. The Sectors Committee retains the right to move funds that appear to be incorrectly classified.
     
  5. Funds in this sector have a primary objective to manage their returns within specified volatility parameters but they may also have additional objectives especially with regard to the generation of income. Volatility Managed funds with a secondary income objective will be flagged at the manager’s request and a list may be provided on request from The Investment Association.
     
  6. Funds in this sector are expected to publicly* disclose that the fund is managed with the intention to deliver a volatility/risk outcome. 

    * Public – disclosure is deemed to be public if made in the KIID or Prospectus; otherwise firms must make disclosure in circumstances in which it is reasonable to believe investors or prospective investors will either receive or be able to access the disclosure. The IA may ask for evidence of such adequate disclosure made outside the KIID or Prospectus.