Multi-asset  

Dennehy urges regulators to play a role in defining risk

Regulators should get involved to help redefine what risk is, Brian Dennehy of Dennehy Weller has said.

The managing director of the Kent-based firm said the FCA should redefine what risk is, claiming it is too often confused with volatility.

“If you define them they are not risk investments, they are volatility investments where the value goes up and down every day,” Mr Dennehy said.

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“The problem is that once you say risk, people’s brains then zone in on the issue and that doesn’t help. The FCA is the one saying we should issue terms that these are risk investments rather than ones whose value can go up and down. Let’s get the terms right and agree what we mean by risk.”

Mr Dennehy said multi-asset funds provided a “simple solution” for IFAs and investors who might be “confused” about allocation.

Dave Fishwick, the head of multi-asset at M&G, agreed: “We are trying to take on a misunderstanding about risk. People confuse risk with volatility all the time. When you are buying into a fund there is no risk unless you assume the fund manager is going to run away.”

According to data from M&G, its funds have recovered from October’s volatility, which saw shares slumping in several markets around the world.

Mr Fishwick continued: “The reality for us is trying to get people to understand what the journey of return is likely to be.”

He added that people’s understanding of this at the moment was “misplaced”.

M&G fund manager Steven Andrew said: “In a phase such as this, when price behaviour is at odds with the facts, we believe compelling investment opportunities often arise. For some time our strongest conviction has been in the attractiveness of selected global equity markets.”

Right to reply

The FCA did not respond to an invitation to comment on this story.