There are over 30 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. 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 links below will take you to 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 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.
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).
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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).
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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.
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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 (as measured by Standard & Poors or an equivalent external rating agency). This excludes convertibles, preference shares and permanent interest bearing shares (PIBs).
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Funds which invest at least 80% of their assets in Sterling denominated (or hedged back to Sterling) fixed interest securities. This excludes convertibles, preference shares and permanent interest bearing shares (PIBs). 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.
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Funds which invest at least 80% of their assets in Sterling denominated (or hedged back to Sterling) below BBB minus fixed interest securities (as measured by Standard and Poors or an equivalent external rating agency). This includes unrated bonds but excludes convertibles, preference shares and permanent interest bearing shares (PIBs).
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Funds which invest at least 80% of their assets in fixed interest securities. All funds which contain more than 80% fixed interest investments are to be classified under this heading regardless of the fact that they may have more than 80% in a particular geographic sector, unless that geographic area is the UK or GEM, when the fund should be classified under the relevant UK (Sterling) or GEM heading. This sector has a wide range of funds which invest in bonds and currencies across geographic area with differing characteristics.
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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.
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Additional note:
Hard currency includes the following currencies: AUD, CAD, CHF, DKK, EUR, GBP, JPY, NOK, SEK, USD.
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.
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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.
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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:
General notes:
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 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:
General notes:
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 which invest at least 80% of their assets in the UK, between 20% and 80% in UK fixed interest securities and between 20% and 80% in UK equities. These funds aim to have a yield in excess of 120% of the FTSE All Share Index.
Specific sector notes:
General notes:
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 which invest at least 80% of their assets in UK equities which have a primary objective of achieving capital growth.
General notes:
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:
Funds which invest at least 80% of their assets in Japanese equities.
General notes:
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:
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:
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 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:
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 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:
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 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:
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 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:
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 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:
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 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:
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 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:
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 which invest at least 80% of their assets globally in equities. Funds must be diversified by geographic region.
Specific sector notes:
General notes:
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 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:
General notes:
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 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.
General notes:
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.
General notes:
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.
General notes:
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.
General notes:
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] 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.
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:
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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.
Funds which invest at least 80% of their assets in technology and telecommunications sectors as defined by major index providers.
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 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.
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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: