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Getting to grips with the mix

This article is part of
Guide to the Mixed Investment sectors

The Mixed Investment Investment Management Association sector categories were introduced following a review in 2011, to replace the Cautious, Balanced and Active managed sectors and provide consumers with a clearer picture of how their money is being invested.

At the same time, the IMA harmonised its sector names with the Association of British Insurers’ Mixed Investment categories to improve consistency and comparability across insurance and investment funds.

The new sector names are also designed to be more transparent and less likely to be misinterpreted. They are based simply on the proportion of a fund that is held in equities.

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How the old sectors translate into the new categories is detailed in the table below:

Previous IMA sector namePrevious ABI sector nameNew sector name
N/AMixed Investment 0-35% SharesMixed Investment 0-35% Shares
Cautious ManagedMixed Investment 20-60% SharesMixed Investment 20-60% Shares
Balanced ManagedMixed Investment 40-85% SharesMixed Investment 40-85% Shares
Active ManagedMixed Investment 60%-100% SharesFlexible Investment

The decision to make explicit a fund’s equity content in the sector name was essentially born out of necessity.

In early 2011 the FSA fined Barclays £7.7m for poor advice relating to funds that were riskier than their names suggested. Much of the penalty centred around recommendations for funds with the words ‘cautious’ and ‘balanced’ in the name, which were in fact riskier than investors had believed.

The outcry following the Barclays debacle went some way to encouraging the IMA to find new names for the ‘ABC’ sectors.

The sectors hold an array of funds that range from standard equity and bond funds to highly diversified multi-asset funds.

While the funds are categorised based on their equity component, they are required to hold a range of investments with criteria governing the proportions of key asset classes.

The criteria for each sector is set out below:

Mixed Investment 0-35% Shares

• Funds do not need to hold any allocation in equities, which can make up a maximum of 35 per cent of the fund

• As a minimum 45 per cent of the fund must be in investment grade fixed income and cash (including short-term fixed income investments and certificates of deposit)

• A minimum of 80 per cent of the fund must be invested in established market currencies (US dollar, sterling and euro), of which 40 per cent must be sterling (including assets hedged back to sterling)

Mixed Investment 20-60 per cent Shares

• Funds must have between 20 per cent and 60 per cent invested in equities

• At least 30 per cent of the fund must be in fixed income investments and/or cash investments

• the minimum exposure to established market currencies is 60 per cent, with 30 per cent held in sterling or assets hedged to sterling

Mixed Investment 40-85 per cent Shares

• Funds in this sector must have between 40 per cent and 85 per cent invested in company shares

• There is no minimum fixed income or cash requirement

• A minimum of 50 per cent of the fund must be in established market currencies, of which 25 per cent must be sterling, which includes assets hedged back to Sterling