Centre for Policy Studies attacks IMA’s sector role
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A research fellow at a major right-wing thinktank has today published a report calling for the IMA to be stripped of its right to manage the UK’s open-ended retail fund sectors.
The latest report by Michael Johnson at the Centre for Policy Studies – entitled ‘Put the saver first: Catalysing a savings culture’ – has been dismissed by the IMA, which issued a fierce response to Mr Johnson’s initial airing of his views about its sectors in May.
Following the first publication Jane Lowe, director of markets at the IMA, said the CPS “doesn’t quite understand what the sectors are all about”.
But in the final 216-page report Mr Johnson added fresh material and argued that the IMA’s stewardship of the fund sectors, which aims to make the performance of similar funds easily comparable, has been flawed.
He claimed the IMA was “unwittingly complicit” in the Arch Cru situation, because it allowed two funds in the Arch Cru range to be listed in its IMA Cautious Managed sector, including its biggest product, the CF Arch Cru Investment Portfolio.
The labelling of the Arch Cru funds as ‘cautious’ was called into question after they were suspended due to a lack of liquidity from a series of controversial investments.
The IMA has since renamed the Cautious Managed sector as Mixed Investment 20-60 per cent Shares.
Mr Johnson also called for the IMA Absolute Return and Protected sector names to be scrapped, quoting 2011 figures that show the majority of funds in both sectors lost money. The IMA is consulting with members about revamping the Absolute Return sector.
“The labels can be debated, but the key issue is whether the IMA should be involved at all in the categorisation of funds,” Mr Johnson added.
“This is a role extension well beyond what is ordinarily considered a conventional remit for a trade body, which is to represent the interests of its members.
“Given that the industry’s interests are not always aligned with savers’ and investors’, the IMA’s involvement is contentious because it is financed by the industry.”
A spokesperson for the IMA said: “There are many sector providers – Lipper, Morningstar, the Association of British Insurers and the European Fund Classification Forum. Sector information is free to the user, and use is voluntary.”
The spokesperson also stated that sectors are monitored by Morningstar, adding that “recent consumer research indicated consumers do not use sectors extensively”.
Elsewhere in the paper, Mr Johnson claimed the FSA’s RDR project had failed to address the “central issue” of what constitutes good advice, and called for the “irretrievably damaged brand” of ‘independent financial adviser’ to be scrapped in favour of ‘financial planner’.