IA to open Volatility Managed sector on 3 April

Added 17th March 2017

The Investment Association (IA) has confirmed it will be launching its Volatility Managed sector on 3 April to accommodate the growing number of outcome-oriented funds currently crowding the IA Unclassified peer group.

IA to open Volatility Managed sector on 3 April

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The trade body announced last year it would be reorganising the growing number of volatility funds - 75 at present - currently couched as ‘unclassified’.

Following industry consultation, the association opted for a new category rather than a complete overhaul of all its sectors as was initially proposed as a solution.

It was intially due to be opening in November 2016 but was delayed due to 

The sector definition will be as follows: “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.”

Volatility is further defined as “one type of risk – a measure of the ups and downs of performance of a fund. The higher the volatility, the more uncertainty there is in the returns.”

The new sector will launch alongside the new yield requirement for the IA UK Equity Income sector, which was announced last week.

Groups will be required to disclose funds are managed with the intention to deliver a volatility or risk outcome as well as provide advisers and consumers with information on how volatility is measured - including the timeframe over which their volatility data is calculated. 

IA member firms will self-elect their funds for inclusion, with the submission process currently underway with the sector committee, which will in turn be counting, calculating performance figures and ranking ahead of the launch on 3 April.

Galina Dimitrova, director of capital markets at the IA, said: “Changes to the distribution chain, new regulation and the introduction of the pension freedoms have seen an evolution in the products offered by the asset management industry.

“The IA sectors always look to evolve alongside the universe of investment funds available to investors, and the launch of the Volatility Managed sector is an important step to grouping more outcome focused funds together for the benefit of consumers and advisers when making investment decisions.

“We will continue to work with our members, advisers and consumer groups to ensure that the sector definitions resonate with the investment funds the industry offers.”

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