Calls for further action after IMA’s fixed income overhaul

Fixed income sectors are due to be changed after a review by the Investment Management Association (IMA), but further reforms are needed according to David Coombs, head of multi-asset at Rathbones.

The IMA review aims to amend the £ High Yield Bond sector to require at least an 80 per cent investment in high yield bonds. Unrated bonds will be treated as core while hybrid assets such as convertibles, preference shares and permanent interest bearing shares (Pibs), will be treated as non-core assets.

The project also states it will treat hybrid assets in the £ Strategic and Global Bonds sector as non-core as well as clarifying the Global Bonds sector definition.

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However, the biggest change will be the creation of a Global Emerging Markets Bond sector. The sector will be effective from 31 December 2013 and firms will have until 31 March 2014 to comply with the changes. The new sector will require funds to invest at least 80 per cent of their assets in emerging market bonds as defined by a recognised GEM bond index. The IMA also stipulates funds in the sector must be diversified by a geographic region.

But Mr Coombs said the industry is “crying out” for a multi-asset sector. While there are currently mixed asset sectors, Mr Coombs said they are too “straitjacketed” for the group, which has chosen to place its multi-asset funds in the Unclassified sector. “Every time we look at our funds we find we would have breached one of the upper or lower limits in a sector,” he said, “A bit more certainty would be very helpful.”

Earlier this year, the Absolute Return sector had its name changed to the Targeted Absolute Return sector after much deliberation from the trade body. The sector changes were initially announced in May 2011, but were subsequently delayed numerous times.