IA launches £19.3 billion Volatility Managed Sector

Monday 3 April 2017

The Investment Association (IA) has today launched its new Volatility Managed sector in response to the growing number of outcome focused products available to investors.

The new sector, which contains products with the objective of managing returns within specified volatility parameters, comprises 83 funds with a combined assets under management of £19.3 billion.

To ensure that the sector continues to work in the best interests of consumers and their advisers, the IA Sectors Committee will be conducting a 12-month review looking at disclosure levels and whether it is possible to develop or sub categorise the sector in a way that better serves investors.

A full list of funds in the Volatility Managed sector can be viewed here.

Galina Dimitrova, Director, Capital Markets, said:

“The launch of the Volatility Managed sector is the latest step by the industry to ensure that the IA Sectors continue to evolve alongside market changes and appropriately reflect the advent of more outcome focused products available to investors.

“We will continue to monitor the sector definitions across the board to ensure that they work in the best interests of consumers and their advisers and appropriately reflect the wide range of funds the industry has to offer.”

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For further information, please contact:

Alex Hogan
Communications Manager
[email protected]
T 020 7269 4620
M 07508 724 066

Notes to editors:

Volatility Managed Sector definition:

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:

• 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.
• 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.
• 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.
• The Sectors Committee retains the right to move funds that appear to be incorrectly classified.
• 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.
• 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.

About the Investment Association:

• The Investment Association is the trade body that represents UK investment managers who manage over £5.7 trillion on behalf of clients
• Our purpose is to ensure investment managers are in the best possible position to:
• • Build people’s resilience to financial adversity
  • Help people achieve their financial aspirations
  • Enable people to maintain a decent standard of living as they grow older
  • Contribute to economic growth through the efficient allocation of capital
• The money our members manage is in a wide variety of investment vehicles including authorised investment funds, pension funds and stocks and shares ISAs.
• The UK is the second largest investment management centre in the world, after the US and manages 37% of all assets managed in Europe.