Skandia: IMA should create sector for ‘risk-targeted’ funds

Skandia Investment Group (SIG)is calling on the IMA to introduce a new sector for 'risk-targeted funds', with legacy 'managed' portfolios shifted to an alternative category where returns are the driver.

In both cases relative performance could be assessed around realised volatility and associated risk-adjusted returns, SIG says.

The IMA is currently consulting again with fund management groups over proposed changes to the Managed sectors.

Its original plans were greeted with uproar from a number of leading houses, including Fidelity and Investec.

In a recent Skandia survey, 84% of advisers did not think the relabeling of the IMA sectors from Aggressive, Balanced and Cautious to A, B and C would help consumer understanding of the level of risk they are taking.

Skandia research also found over 90% of financial advisers believe the fund label ‘cautious' could be misleading to consumers.

Advisers surveyed said the majority of their customers would score the risk level of a ‘cautious' fund at around 2 or 3 out of 10 (10 being the most risky).

However, the actual level of risk for the majority of funds in the IMA Cautious Managed sector is closer to 5 or 6 out of 10, with some even higher than that, according to SIG analysis.