Banking

Investment Association to launch six sectors next week as original plans for eight fall flat

Two of the new sectors will be regional; IA Latin America funds will have at least 80% of their portfolio invested in Latin American equities, while IA Indian/Indian Subcontinent funds will have at least an 80% allocation to Indian equities, or stocks across the Indian sub-continent.

Elsewhere, the IA will launch the IA Financials and Financial Innovation sector for funds that hold at least 80% of their portfolios in financial services companies and “related sectors”, and the IA Healthcare sector for portfolios holding more than 80% in pharmaceuticals, healthcare equipment and healthcare services.

Research shows eight in ten global funds struggle to beat the benchmark

IA Infrastructure and IA Commodity/Natural Resources are the final two sectors in the new suite, which will also have an 80% minimum allocation to their respective market areas.

It was originally announced in May this year that eight new sectors would be introduced, although the IA Gold & Precious Metals sector was scrapped given fewer than ten funds opted to be classified within the sector, according to the IA.

The organisation had also hoped to launch a Global Smaller Companies sector, but its launch has been postponed and “remains dependent on further fund confirmations”.

A spokesperson for the IA told Investment Week: “We keep all our sectors under review to reflect the evolution of the retail investment market. For a sector to be created there must be a significant group of funds that would create a peer group – i.e. at least ten funds with similar investment objectives. Firms that are eligible can then decide to join the sectors. 

“The new Latin America, India/Indian Subcontinent, Financials and Financial Innovation, Healthcare, Infrastructure and Commodities and Natural Resources sectors will launch on 13 September, making it easier for savers and advisers to find and compare these types of funds.”

The move comes five months after the IA split its Global Bonds sector into 14 new segments. It also introduced ETFs into its universe in April this year, which led to a total of 4,000 funds split across IA sectors.

Ben Yearsley, director of Fairview Investing, told Investment Week the inclusion of six new sectors “might be good for those in the industry” but that, for the end user or everyday investor, it “just adds complexity rather than making the job of picking funds easier”.

“What is the point of having sectors with only a handful of funds in?” he added.

However, Darius McDermott, managing director of Chelsea Financial Services, said: “I think it is sensible – each of these areas has enough funds to warrant a new sector and it will make comparison far better and far easier.” 

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