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Managing fund sectors

Sector governance

The Investment Association sectors are run by Investment Association staff and overseen by the Sectors Committee.

Sectors committee

The Sectors Committee has oversight of the entire sector classification scheme. It provides guidance to fund providers and managers, data companies and others on sector-related issues. The Committee is made up of Investment Association members with a range of industry experience, Investment Association staff and third party data companies.

The Investment Association Sectors Committee meets on a regular basis to review issues relating to the sectors, including carrying out regular reviews of different sectors.

Committee Terms of Reference

Guiding principles for sectors

As far as possible the Sectors Committee seeks to ensure:

Uniformity – in the way that data is prepared and presented (recognising that data companies are not bound by the Committee’s guidance and may choose to present the data differently)

Continuity – on the premise that frequent change is confusing for investors

Intelligibility – recognising that it is the way in which data is interpreted that ultimately determines its effectiveness

Independence – measurement comparisons should be independent of commercial considerations.

Sector monitoring

The monitoring process involves an analysis of the portfolio holdings of a fund to check that each fund meets the parameters of the sector and therefore may be compared with other funds in that sector. To do this, the Investment Association has appointed an independent third party, Morningstar, to collect data directly from the fund managers, analyse it, and report to the Investment Association on funds which appear to be in breach of the sector criteria. Additional data on the economic exposure of a fund may be collected, as necessary.

The Investment Association undertakes the enforcement function in relation to funds’ compliance with the sector criteria, based on the reports prepared and submitted by Morningstar. Funds which do not meet the sector parameters are removed.

The nature of the monitoring process is such that at any particular time a fund may be non-compliant. Monthly reporting introduces a measure of delay and at times follow-up and clarifications may show a fund was in fact compliant or cause it to become compliant. Sector monitoring does not provide a real-time verification of compliance nor does a breach of sector criteria inexorably lead to removal if rectified.

Forms for managers

The forms for manager requests can be found here.

These include Fund Details forms, Sector Change form, Fund Merger form and guidance for offshore funds.