FE launches five risk-rated sectors

Fund research firm FE has launched five sectors for risk-targeted funds based on portfolios’ volatility relative to the FTSE 100 index.

The UK Risk-targeted Multi-Asset (RMA) sectors are designed to allow advisers to compare the growing number of funds which target a specific risk band, for example those developed by Distribution Technology and eValue. The sectors are available to FE Analytics users from today.

Funds are assigned a risk score, with 0 equating to cash and 100 being the level of the FTSE 100 stock index. They are then split into one of five sectors:

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Sector nameFE risk score band
UK RMA Risk Band 1less than 30
UK RMA Risk Band 230-50
UK RMA Risk Band 350-70
UK RMA Risk Band 470-85
UK RMA Risk Band 5more than 85

According to the risk scores currently applied to funds by FE, Standard Life Investments’ MyFolio fund range I and II will sit in the RMA Risk Band 1 sector, while its highest-risk fund range V is mainly within Risk Band 3.

FE will monitor the funds and will reassign them to a different sector if their risk scores move and remain outside of their assigned risk band for 16 weeks. The funds must have an 18-month track record to qualify for the sectors. FE said it had identified 230 funds which will sit within its sectors.

FE managing director Michael Holland said the development was “a logical step” for the group’s research into multi-asset funds.

Richard Romer-Lee, managing director of Square Mile Investment Research, said: “The implementation of the RDR has led to a growth in the number of advisers seeking to outsource investment decisions. This new universe from FE will better equip advisers to demonstrate best practice by providing a mechanism for like-for-like comparisons of risk as well as performance.”