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Sector definitions

There are over 30 Investment Association sectors. Sector definitions are mostly based on assets, such as equities and fixed income, and may also have a geographic focus. A few sectors focus on investment strategy, such as Targeted Absolute Return and Volatility Managed. You can use the sectors to find and compare funds, for instance to look at performance and fund charges.

We divide the sectors into broad groups, each with a different investment focus: Growth, Income, Capital Protection, Specialist funds and those with an outcome intention. Some funds choose to remain Unclassified within the sectors.

Sectors are there to help you navigate around the large universe of funds in the UK and include some offshore (EU) funds. The sectors divide up the funds into smaller groups, to allow you to make like-for-like comparisons between funds in one or more sectors. You may for example wish to compare performance, or charges. Funds within any single sector may still offer considerable variety, whether of investment approach (for example active vs passive) or choice of underlying instruments (such as large cap vs mid cap stocks).

The links below will take you to the definitions for each broad group or sector, or you can look at the sector schematic to see how all the sectors fit together.

Funds principally targeting capital protection
  1. Short Term Money Market

    Funds which invest their assets in money market instruments and comply with the definition of a ‘Short Term Money Market’ fund set out in the COLL Sourcebook.

    Notes:

    1. The COLL Sourcebook (COLL 5.9 as at 1 November 2011) makes reference to two CESR (now ESMA, but appearing as CESR in COLL) common definitions for European Money Market Funds – “short term money market” funds and “money market” funds. The Investment Association definitions for Money Market funds follow the regulatory definitions which means that the number of funds in these sectors may be smaller than for other Investment Association sectors.
    2. Funds provide quarterly certification to Morningstar UK, The Investment Association's monitoring company, that they have complied with the rules for “short term money market” or “money market” funds set out in the COLL Sourcebook. Certification shall indicate whether firms are “short term money market” funds or “money market” funds. Short term money market funds shall also indicate whether they are constant (amortized cost) or variable NAV funds.
    3. Certification shall be provided with the usual returns to the monitoring company in the month following the end of each calendar quarter (i.e. after 31 March, 30 June, 30 September, 31 December)
    4. Firms are required to notify The Investment Association should there be a rule breach. In the event of such a breach, The Investment Association may suspend the fund from the sector whilst the position is clarified.
    5. Firms should supply portfolio holdings data to the monitoring company monthly, as for other funds. This data will not be used for monitoring purposes but may be used to check queries that arise with regard to certification.
  2. Money Market

    Funds which invest their assets in money market instruments and comply with the definition of a ‘Money Market’ fund set out in the COLL Sourcebook.

    Notes:

    1. The COLL Sourcebook (COLL 5.9 as at 1 November 2011) makes reference to two CESR (now ESMA, but appearing as CESR in COLL) common definitions for European Money Market Funds – “short term money market” funds and “money market” funds. The Investment Association definitions for Money Market funds follow the regulatory definitions which means that the number of funds in these sectors may be smaller than for other Investment Association sectors.
    2. Funds provide quarterly certification to Morningstar UK, The Investment Association's monitoring company, that they have complied with the rules for “short term money market” or “money market” funds set out in the COLL Sourcebook. Certification shall indicate whether firms are “short term money market” funds or “money market” funds. Short term money market funds shall also indicate whether they are constant (amortized cost) or variable NAV funds.
    3. Certification shall be provided with the usual returns to the monitoring company (Morningstar) in the month following the end of each calendar quarter (i.e. after 31 March, 30 June, 30 September, 31 December)
    4. Firms are required to notify The Investment Association should there be a rule breach. In the event of such a breach, The Investment Association may suspend the fund from the sector whilst the position is clarified.
    5. Firms should supply portfolio holdings data to the monitoring company monthly, as for other funds. This data will not be used for monitoring purposes but may be used to check queries that arise with regard to certification.
  3. Protected

    Funds, other than money market funds, which principally aim to provide a return of a set amount of capital back to the investor (either explicitly protected or via an investment strategy highly likely to achieve this objective) plus the potential for some investment return.

    Note:

    1. Funds in this sector typically offer a strategy which protects all or part of the investors' capital. Depending on the type of protection provided investors may be exposed to the risk of counterparty default and with some types of fund may not get back their original investment if encashing early. Investors may need to seek investment advice to ascertain the quality of the protection on offer.
Funds principally targeting Income (by asset category)
Fixed Income Sectors
  1. UK Gilts

    Funds which invest at least 95% of their assets in Sterling denominated (or hedged back to Sterling) government backed securities, with a rating the same or higher than that of the UK, with at least 80% invested in UK government securities (Gilts).

    Notes:

    1. The core 80% in the UK Gilts sector should include only UK conventional Gilts not UK Index Linked Gilts.
    2. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
    3. Convertibles, preference shares and permanent interest bearing shares (PIBs) are excluded from core holdings in the fixed income sector classifications.
    4. Where ratings of a bond differ between the rating agencies, an average credit rating should be used.
    5. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
    6. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
    7. Investment in all types of Asset Backed Securities (ABS) is allowed in the core holdings of £ Corporate Bond, £ Strategic Bond, £ High Yield, Global Bonds and Global Emerging Markets Bond sectors. It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist sector.
    8. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
  2. UK Index Linked Gilts

    Funds which invest at least 95% of their assets in Sterling denominated (or hedged back to Sterling) government backed index linked securities, with a rating the same or higher than that of the UK, with at least 80% invested in UK Index Linked Gilts.

    Notes:

    1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
    2. Convertibles, preference shares and permanent interest bearing shares (PIBs) are excluded from core holdings in the fixed income sector classifications.
    3. Where ratings of a bond differ between the rating agencies, an average credit rating should be used.
    4. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
    5. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
    6. Investment in all types of Asset Backed Securities (ABS) is allowed in the core holdings of £ Corporate Bond, £ Strategic Bond, £ High Yield, Global Bonds and Global Emerging Markets Bond sectors. It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist sector.
    7. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
  3. £ Corporate Bond

    Funds which invest at least 80% of their assets in Sterling denominated (or hedged back to Sterling), Triple BBB minus or above corporate bond securities (as measured by Standard & Poors or an equivalent external rating agency). This excludes convertibles, preference shares and permanent interest bearing shares (PIBs).

    Notes:

    1. Investment in supranational debt and government backed debt is counted towards the core 80% for “corporate” assets. Investment in Gilts and non-UK sovereign debt is not.
    2. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
    3. Convertibles, preference shares and permanent interest bearing shares (PIBs) are excluded from core holdings in the fixed income sector classifications.
    4. Where ratings of a bond differ between the rating agencies, an average credit rating should be used.
    5. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
    6. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
    7. Investment in all types of Asset Backed Securities (ABS) is allowed in the core holdings of £ Corporate Bond, £ Strategic Bond, £ High Yield, Global Bonds and Global Emerging Markets Bond sectors. It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to the Investment Association Specialist sector.
    8. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
  4. £ Strategic Bond

    Funds which invest at least 80% of their assets in Sterling denominated (or hedged back to Sterling) fixed interest securities. This excludes convertibles, preference shares and permanent interest bearing shares (PIBs). At any point in time the asset allocation of these funds could theoretically place the fund in one of the other Fixed Interest sectors. The funds will remain in this sector on these occasions since it is the Manager's stated intention to retain the right to invest across the Sterling fixed interest credit risk spectrum.

    Notes:

    1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
    2. Convertibles, preference shares and permanent interest bearing shares (PIBs) are excluded from core holdings in the fixed income sector classifications.
    3. Where ratings of a bond differ between the rating agencies, an average credit rating should be used.
    4. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
    5. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
    6. Investment in all types of Asset Backed Securities (ABS) is allowed in the core holdings of £ Corporate Bond, £ Strategic Bond, £ High Yield, Global Bonds and Global Emerging Markets Bond sectors. It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to the Investment Association Specialist sector.
    7. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
  5. £ High Yield

    Funds which invest at least 80% of their assets in Sterling denominated (or hedged back to Sterling) below BBB minus fixed interest securities (as measured by Standard and Poors or an equivalent external rating agency). This includes unrated bonds but excludes convertibles, preference shares and permanent interest bearing shares (PIBs).

    Notes:

    1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
    2. Convertibles, preference shares and permanent interest bearing shares (PIBs) are excluded from core holdings in the fixed income sector classifications.
    3. Where ratings of a bond differ between the rating agencies, an average credit rating should be used.
    4. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
    5. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
    6. Investment in all types of Asset Backed Securities (ABS) is allowed in the core holdings of £ Corporate Bond, £ Strategic Bond, £ High Yield, Global Bonds and Global Emerging Markets Bond sectors. It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to the Investment Association Specialist sector.
    7. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
  6. Global Bonds

    Funds which invest at least 80% of their assets in fixed interest securities. All funds which contain more than 80% fixed interest investments are to be classified under this heading regardless of the fact that they may have more than 80% in a particular geographic sector, unless that geographic area is the UK or GEM, when the fund should be classified under the relevant UK (Sterling) or GEM heading. This sector has a wide range of funds which invest in bonds and currencies across geographic area with differing characteristics.

    Notes:

    1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
    2. Convertibles, preference shares and permanent interest bearing shares (PIBs) are excluded from core holdings in the fixed income sector classifications.
    3. Where ratings of a bond differ between the rating agencies, an average credit rating should be used.
    4. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
    5. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
    6. Investment in all types of Asset Backed Securities (ABS) is allowed in the core holdings of £ Corporate Bond, £ Strategic Bond, £ High Yield, Global Bonds and Global Emerging Markets Bond sectors. It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist sector.
    7. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
  7. Global Emerging Markets Bond

    Funds which invest at least 80% of their assets in emerging market bonds as defined by a recognised Global Emerging Markets Bond index. Funds must be diversified by geographic region.

    Notes:

    1. Across all fixed income sectors there is no prescription within the non-core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF (Treating Customers Fairly) obligations.
    2. Convertibles, preference shares and permanent interest bearing shares (PIBs) are excluded from core holdings in the fixed income sector classifications.
    3. Where ratings of a bond differ between the rating agencies, an average credit rating should be used.
    4. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector. The Investment Association does not wish to inhibit funds from using their full UCITS powers, whilst recognizing the limitations on independent monitoring at the present time. Firms are asked to provide certification of the economic exposure of their funds to help the monitoring company interpret the purpose of a derivative as far as possible.
    5. In the fixed income sectors, a security with 0-3 months to maturity will be treated as a non-core holding. Securities maturing within 3-12 months will be treated as bonds.
    6. Investment in all types of Asset Backed Securities (ABS) is allowed in the core holdings of £ Corporate Bond, £ Strategic Bond, £ High Yield, Global Bonds and Global Emerging Markets Bond sectors. It is the responsibility of the providers to specify, monitor and convey the risk characteristics of an individual fund rather than the Investment Association or its Sectors Committee. Funds which invest solely in specific types of investment securities for examples convertibles or ABS are classified to The Investment Association Specialist sector.
    7. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
Equity Sectors
  1. UK Equity Income

    Funds which invest at least 80% in UK equities and which intend to achieve a historic yield on the distributable income in excess of 100% of the FTSE All Share yield at the fund's year end on a 3 year rolling basis and 90% on an annual basis.

    Specific sector notes:

    1. 1 To ensure compliance with the sector criteria, funds should supply data for monitoring to enable the calculation of historic yield based on The Investment Association guidelines set out in "Authorised Funds: Yield Calculation and Disclosure Guidelines - 2012".

    2. 2 Funds are required to submit yield data at the fund’s year end to the sectors team at The Investment Association and to the monitoring company.

    3. 3 To ensure compliance with the intended 100% yield, funds in the sector will be tested over 3 year rolling periods by taking a simple average of the yield figure achieved for each fund at its year end. Funds that fail to exceed the 100% average yield for each 3 year rolling period will be removed from the sector. (As an illustration, this would require a fund that delivered 90% in the first year and 100% in the second year to deliver a yield in excess of 110% in the third year, if it were to be allowed to remain in the sector).

    4. 4 Annually, at the fund’s year-end, each fund in the sector must achieve a yield of not less than 90% of the FTSE All Share yield. Funds that fail to do so will be removed from the sector.

    5. 5 The Investment Association will measure yield to one decimal place.

    6. 6 To assist users of the sectors and aid comparison, The Investment Association will publish the annual yield achieved by each fund in the sector.


    General notes:

    1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
    2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
    3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

    FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

  2. Global Equity Income

    Funds which invest at least 80% of their assets globally in equities. Funds must be diversified by geographic region and intend to achieve a historic yield on the distributable income in excess of 100% of the MSCI World Index yield at the fund’s year end on a 3 year rolling basis and 90% on an annual basis.

    Specific sector notes:

    1. 1 Funds must be diversified by geographic region.

    2. 2 Funds which qualify for the Global Emerging Markets equity sector but also have an income bias will be excluded

    3. 3 To ensure compliance with the sector criteria, funds should supply data for monitoring to enable the calculation of historic yield based on The Investment Association guidelines set out in "Authorised Funds: Yield Calculation and Disclosure Guidelines - 2012".

    4. 4 Funds are required to submit yield data at the fund’s year end to the sector team at The Investment Association and to the monitoring company, Morningstar.

    5. 5 To ensure compliance with the intended 100% yield, funds in the sector will be tested over 3 year rolling periods by taking a simple average of the yield figure achieved for each fund at its year end. Funds that fail to exceed the 100% average yield for each 3 year rolling period will be removed from the sector. (As an illustration, this would require a fund that delivered 90% in the first year and 100% in the second year to deliver a yield in excess of 110% in the third year, if it were to be allowed to remain in the sector.)

    6. 6 Annually, at the fund’s year-end, each fund in the sector must achieve a yield of not less than 90% of the MSCI World Index yield. Funds that fail to do so will be removed from the sector.

    7. 7 The Investment Association will measure yield to one decimal place.

    8. 8 To assist users of the sectors and aid comparison, The Investment Association will publish the annual yield achieved by each fund in the sector.


    General notes:

    1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
    2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
    3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
    4. Funds in the sector above should be broadly diversified within the relevant country, region or globally. Funds that invest solely in: a specialist theme (for example an agricultural commodities fund), or a single country in a multi-currency region (for example a German fund), or in assets of a particular market capitalisation (for example an Asia Pac small cap fund), or a single industry sector (for example a gold fund) must still meet the required geographic dispersion based on the relevant FTSE or MSCI index. Funds that fail to meet the diversification criteria may be incorporated in the Specialist sector. Exceptions are funds with a focus on China which are classified to the China /Greater China sector and technology or telecommunications funds which are classified to the Technology & Telecommunications sector.
    5. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

    FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

Mixed Asset Sectors
  1. UK Equity & Bond Income

    Funds which invest at least 80% of their assets in the UK, between 20% and 80% in UK fixed interest securities and between 20% and 80% in UK equities. These funds aim to have a yield in excess of 120% of the FTSE All Share Index.

    Specific sector notes:

    1. Please refer to Fixed Income sector notes
    2. In the mixed assets sectors (Mixed Investment 0-35% Shares, Mixed Investment 20-60% Shares, Mixed Investment 40-85% Shares, Flexible Investment and UK Equity and Bond Income) cash and fixed income will be treated as interchangeable.
    3. Hybrid instruments, such as convertibles, preference shares or PIBs should not contribute to the minimum 20% required in UK fixed income or UK equity.
    4. Instruments that require clarification as to their treatment within the asset categories should not be used to contribute to the core parameters. Clarification of treatment can be sought from the monitoring company.

    General notes:

    1. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
    2. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.

    FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.


Funds principally targeting Growth (by asset category)
Equity Sectors
UK Equities
  1. UK All Companies

    Funds which invest at least 80% of their assets in UK equities which have a primary objective of achieving capital growth.

    General notes:

    1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
    2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
    3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
  2. UK Smaller Companies

    Funds which invest at least 80% of their assets in UK equities of companies which form the bottom 10% by market capitalisation.

    Specific sector note:

    The universe of eligible UK equities is constructed by the monitoring company and comprises all relevant securities available from the Morningstar database from which a market capitalisation cut-off is derived.

    General notes:

    1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
    2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
    3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
Overseas Equities
  1. Japan

    Funds which invest at least 80% of their assets in Japanese equities.

    General notes:

    1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
    2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
    3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
  2. Japanese Smaller Companies

    Funds which invest at least 80% of their assets in Japanese equities of companies which form the bottom 30% by market capitalisation.

    Specific sector note:

    The universe of eligible equities is constructed by the monitoring company and comprises all relevant securities available from the Morningstar database from which a market capitalisation cut-off is derived.

    General notes:

    1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
    2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
    3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
  3. Asia Pacific including Japan

    Funds which invest at least 80% of their assets in Asia Pacific equities including a Japanese content. The Japanese content must make up less than 80% of assets.

    General notes:

    1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
    2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
    3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
    4. Funds in the sector above should be broadly diversified within the relevant country, region or globally. Funds that invest solely in: a specialist theme (for example an agricultural commodities fund), or a single country in a multi-currency region (for example a German fund), or in assets of a particular market capitalisation (for example an Asia Pac small cap fund), or a single industry sector (for example a gold fund) must still meet the required geographic dispersion based on the relevant FTSE or MSCI index. Funds that fail to meet the diversification criteria may be incorporated in the Specialist sector. Exceptions are funds with a focus on China which are classified to the China /Greater China sector and technology or telecommunications funds which are classified to the Technology & Telecommunications sector.
    5. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

    FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

  4. Asia Pacific excluding Japan

    Funds which invest at least 80% of their assets in Asia Pacific equities and exclude Japanese securities.

    Specific sector note:

    Up to 5% (but no more than 5%) of the total assets of the fund can be invested in Japanese equities to allow flexibility for corporate actions, for example.

    General notes:

    1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
    2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
    3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
    4. Funds in the sector above should be broadly diversified within the relevant country, region or globally. Funds that invest solely in: a specialist theme (for example an agricultural commodities fund), or a single country in a multi-currency region (for example a German fund), or in assets of a particular market capitalisation (for example an Asia Pac small cap fund), or a single industry sector (for example a gold fund) must still meet the required geographic dispersion based on the relevant FTSE or MSCI index. Funds that fail to meet the diversification criteria may be incorporated in the Specialist sector. Exceptions are funds with a focus on China which are classified to the China /Greater China sector and technology or telecommunications funds which are classified to the Technology & Telecommunications sector.
    5. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

    FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

  5. China / Greater China

    Funds which invest at least 80% of their assets directly or indirectly in equities of the People's Republic of China, Hong Kong or Taiwan. Funds may invest in one or more of the countries.

    Specific sector note:

    Equity investment will be monitored by reference to companies listed on one or more of the stock exchanges of mainland China, Hong Kong or Taiwan.

    General notes:

    1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
    2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
    3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
    4. Funds in the sector above should be broadly diversified within the relevant country, region or globally. Funds that invest solely in: a specialist theme (for example an agricultural commodities fund), or a single country in a multi-currency region (for example a German fund), or in assets of a particular market capitalisation (for example an Asia Pac small cap fund), or a single industry sector (for example a gold fund) must still meet the required geographic dispersion based on the relevant FTSE or MSCI index. Funds that fail to meet the diversification criteria may be incorporated in the Specialist sector. Exceptions are funds with a focus on China which are classified to the China /Greater China sector and technology or telecommunications funds which are classified to the Technology & Telecommunications sector.
    5. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

    FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

  6. North America

    Funds which invest at least 80% of their assets in North American equities.

    General notes:

    1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
    2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
    3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
    4. Funds in the sector above should be broadly diversified within the relevant country, region or globally. Funds that invest solely in: a specialist theme (for example an agricultural commodities fund), or a single country in a multi-currency region (for example a German fund), or in assets of a particular market capitalisation (for example an Asia Pac small cap fund), or a single industry sector (for example a gold fund) must still meet the required geographic dispersion based on the relevant FTSE or MSCI index. Funds that fail to meet the diversification criteria may be incorporated in the Specialist sector. Exceptions are funds with a focus on China which are classified to the China /Greater China sector and technology or telecommunications funds which are classified to the Technology & Telecommunications sector.
    5. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

    FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

  7. North American Smaller Companies

    Funds which invest at least 80% of their assets in North American equities of companies which form the bottom 20% by market capitalisation.

    Specific sector note:

    The universe of eligible equities is constructed by the monitoring company and comprises all relevant securities available from the Morningstar database from which a market capitalisation cut-off is derived.

    General notes:

    1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
    2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
    3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
    4. Funds in the sector above should be broadly diversified within the relevant country, region or globally. Funds that invest solely in: a specialist theme (for example an agricultural commodities fund), or a single country in a multi-currency region (for example a German fund), or in assets of a particular market capitalisation (for example an Asia Pac small cap fund), or a single industry sector (for example a gold fund) must still meet the required geographic dispersion based on the relevant FTSE or MSCI index. Funds that fail to meet the diversification criteria may be incorporated in the Specialist sector. Exceptions are funds with a focus on China which are classified to the China /Greater China sector and technology or telecommunications funds which are classified to the Technology & Telecommunications sector.
    5. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

    FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

  8. Europe including UK

    Funds which invest at least 80% of their assets in European equities. They may include UK equities, but these must not exceed 80% of the fund's assets.

    General notes:

    1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
    2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
    3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
    4. Funds in the sector above should be broadly diversified within the relevant country, region or globally. Funds that invest solely in: a specialist theme (for example an agricultural commodities fund), or a single country in a multi-currency region (for example a German fund), or in assets of a particular market capitalisation (for example an Asia Pac small cap fund), or a single industry sector (for example a gold fund) must still meet the required geographic dispersion based on the relevant FTSE or MSCI index. Funds that fail to meet the diversification criteria may be incorporated in the Specialist sector. Exceptions are funds with a focus on China which are classified to the China /Greater China sector and technology or telecommunications funds which are classified to the Technology & Telecommunications sector.
    5. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

    FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

  9. Europe excluding UK

    Funds which invest at least 80% of their assets in European equities and exclude UK securities.

    Specific sector note:

    Up to 5% (but no more than 5%) of the total assets of the fund can be invested in UK equities to allow flexibility for corporate actions, for example.

    General notes:

    1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
    2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
    3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
    4. Funds in the sector above should be broadly diversified within the relevant country, region or globally. Funds that invest solely in: a specialist theme (for example an agricultural commodities fund), or a single country in a multi-currency region (for example a German fund), or in assets of a particular market capitalisation (for example an Asia Pac small cap fund), or a single industry sector (for example a gold fund) must still meet the required geographic dispersion based on the relevant FTSE or MSCI index. Funds that fail to meet the diversification criteria may be incorporated in the Specialist sector. Exceptions are funds with a focus on China which are classified to the China /Greater China sector and technology or telecommunications funds which are classified to the Technology & Telecommunications sector.
    5. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

    FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

  10. European Smaller Companies

    Funds which invest at least 80% of their assets in European equities of companies which form the bottom 20% by market capitalisation in the European market. They may include UK equities, but these must not exceed 80% of the fund's assets. (‘Europe' includes all countries in the MSCI/FTSE pan European indices.)

    Specific sector notes:

    The universe of eligible equities is constructed by the monitoring company and comprises all relevant securities available from the Morningstar database from which a market capitalisation cut-off is derived.

    General notes:

    1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
    2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
    3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
    4. Funds in the sector above should be broadly diversified within the relevant country, region or globally. Funds that invest solely in: a specialist theme (for example an agricultural commodities fund), or a single country in a multi-currency region (for example a German fund), or in assets of a particular market capitalisation (for example an Asia Pac small cap fund), or a single industry sector (for example a gold fund) must still meet the required geographic dispersion based on the relevant FTSE or MSCI index. Funds that fail to meet the diversification criteria may be incorporated in the Specialist sector. Exceptions are funds with a focus on China which are classified to the China /Greater China sector and technology or telecommunications funds which are classified to the Technology & Telecommunications sector.
    5. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

    FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

  11. Global

    Funds which invest at least 80% of their assets globally in equities. Funds must be diversified by geographic region.

    Specific sector notes:

    1. The main focus of funds which elect to be classified to this sector should be geographic diversification.
    2. Funds which qualify for a UK, regional or the Global Emerging Markets equity sector will be excluded.
    3. Funds may elect to be classified to the Global sector on the basis of geographic diversification even where a style or thematic bias exists - for example Global Consumer funds, Global Climate Change funds, Global Income funds, Global Smaller Companies funds.
    4. Global funds which focus solely on a single industry sector may also elect to be classified to the Global sector, subject to maintaining geographic diversification - for example all types of Global Commodity funds (Agriculture/ Resources/Gold), Global Financials, Global Pharmaceuticals funds.

    General notes:

    1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
    2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
    3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
    4. Funds in the sector above should be broadly diversified within the relevant country, region or globally. Funds that invest solely in: a specialist theme (for example an agricultural commodities fund), or a single country in a multi-currency region (for example a German fund), or in assets of a particular market capitalisation (for example an Asia Pac small cap fund), or a single industry sector (for example a gold fund) must still meet the required geographic dispersion based on the relevant FTSE or MSCI index. Funds that fail to meet the diversification criteria may be incorporated in the Specialist sector. Exceptions are funds with a focus on China which are classified to the China /Greater China sector and technology or telecommunications funds which are classified to the Technology & Telecommunications sector.
    5. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

    FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

  12. Global Emerging Markets

    Funds which invest 80% or more of their assets in equities from emerging market countries as defined by the relevant FTSE or MSCI Emerging Markets and Frontier indices. The maximum frontier equity exposure is restricted to 20% of the total fund.

    Specific sector notes:

    1. Funds which invest solely in frontier markets or regional emerging markets (e.g. emerging Europe) are included in the Specialist sector.
    2. Shares of companies whose business is predominantly based in emerging markets but which are listed on exchanges in developed markets will not be included as core emerging market assets (i.e. in the 80%) but can be held as non-core assets (i.e. in the 20%).

    General notes:

    1. Instruments that require clarification as to their treatment within the asset categories should not typically be used to contribute to the core parameters. Clarification of treatment can be checked with the monitoring company.
    2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
    3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions.
    4. Funds in the sector above should be broadly diversified within the relevant country, region or globally. Funds that invest solely in: a specialist theme (for example an agricultural commodities fund), or a single country in a multi-currency region (for example a German fund), or in assets of a particular market capitalisation (for example an Asia Pac small cap fund), or a single industry sector (for example a gold fund) must still meet the required geographic dispersion based on the relevant FTSE or MSCI index. Funds that fail to meet the diversification criteria may be incorporated in the Specialist sector. Exceptions are funds with a focus on China which are classified to the China /Greater China sector and technology or telecommunications funds which are classified to the Technology & Telecommunications sector.
    5. If uncertainty arises about which countries are included in a specific regional equity sector reference should be made to the relevant FTSE or MSCI index for guidance. Where there is a difference the broader index should be used.

    FTSE®is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data.

Mixed Asset Sectors
  1. Mixed Investment 0-35% Shares

    Funds in this sector are required to have a range of different investments. Up to 35% of the fund can be invested in company shares (equities). At least 45% of the fund must be in fixed income investments (for example, corporate and government bonds) and/or “cash” investments. “Cash” can include investments such as current account cash, short-term fixed income investments and certificates of deposit.

    • Maximum 35% equity exposure (including convertibles)
    • No minimum equity requirement
    • Minimum 45% investment grade fixed income and cash
    • Minimum 80% investment in established market currencies (US Dollar, Sterling & Euro) of which 40% must be Sterling
    • Sterling requirement includes assets hedged back to Sterling

    General notes:

    1. At any one time the asset allocation of a fund in these sectors (particularly the Flexible Investment sector) may mean that the fund meets the requirements of more than one sector. The fund would remain in the elected sector on these occasions, but subject to complying with these notes.
    2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
    3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions. Decisions will be made by the ABI Investment Classification Committee or the Investment Association Sectors Committee and will be accepted as a peer group decision by funds in the sectors.
    4. For further details on the treatment of indirect property assets please see Q21 of the frequently asked questions on the website.
  2. Mixed Investment 20-60% Shares

    Funds in this sector are required to have a range of different investments. The fund must have between 20% and 60% invested in company shares (equities). At least 30% of the fund must be in fixed income investments (for example, corporate and government bonds) and/or “cash” investments. “Cash” can include investments such as current account cash, short-term fixed income investments and certificates of deposit.

    • Maximum 60% equity exposure (including convertibles)
    • Minimum 20% equity exposure
    • Minimum 30% fixed income and cash
    • Minimum 60% investment in established market currencies (US Dollar, Sterling & Euro) of which 30% must be Sterling
    • Sterling requirement includes assets hedged back to Sterling

    General notes:

    1. At any one time the asset allocation of a fund in these sectors (particularly the Flexible Investment sector) may mean that the fund meets the requirements of more than one sector. The fund would remain in the elected sector on these occasions, but subject to complying with these notes.
    2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
    3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions. Decisions will be made by the ABI Investment Classification Committee or the Investment Association Sectors Committee and will be accepted as a peer group decision by funds in the sectors
    4. For further details on the treatment of indirect property assets please see Q21 of the frequently asked questions on the website
  3. Mixed Investment 40-85% Shares

    Funds in this sector are required to have a range of different investments. However, there is scope for funds to have a high proportion in company shares (equities). The fund must have between 40% and 85% invested in company shares.

    • Maximum 85% equity exposure (including convertibles)
    • Minimum 40% equity exposure
    • No minimum fixed income or cash requirement
    • Minimum 50% investment in established market currencies (US Dollar, Sterling & Euro) of which 25% must be Sterling
    • Sterling requirement includes assets hedged back to Sterling

    General notes:

    1. At any one time the asset allocation of a fund in these sectors (particularly the Flexible Investment sector) may mean that the fund meets the requirements of more than one sector. The fund would remain in the elected sector on these occasions, but subject to complying with these notes.
    2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
    3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions. Decisions will be made by the ABI Investment Classification Committee or the Investment Association Sectors Committee and will be accepted as a peer group decision by funds in the sectors.
    4. For further details on the treatment of indirect property assets please see Q21 of the frequently asked questions on the website
  4. Flexible Investment

    The funds in this sector are expected to have a range of different investments. However, the fund manager has significant flexibility over what to invest in. There is no minimum or maximum requirement for investment in company shares (equities) and there is scope for funds to have a high proportion of shares.

    The manager is accorded a significant degree of discretion over asset allocation and is allowed to invest up to 100% in equities at their discretion.

    • No minimum equity requirement
    • No minimum fixed income or cash requirement
    • No minimum currency requirement

    General notes:

    1. At any one time the asset allocation of a fund in these sectors (particularly the Flexible Investment sector) may mean that the fund meets the requirements of more than one sector. The fund would remain in the elected sector on these occasions, but subject to complying with these notes.
    2. The “look-through” principle will apply when considering securities that are structured with the legal form of an equity (such as a listed investment trust and some listed ETFs), but manage or invest in different underlying assets such as property, commodities, etc. Where the underlying entity itself invests in equities, the holdings are classified as equities. Further details may be obtained from the monitoring company. The monitoring company’s decision is final.
    3. Funds in the sectors which do not appear to comply with the “spirit” of a definition will be removed from the sector. Funds will be issued with a warning before they are removed. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are in practice broad definitions. Decisions will be made by the ABI Investment Classification Committee or the Investment Association Sectors Committee and will be accepted as a peer group decision by funds in the sectors.
    4. For further details on the treatment of indirect property assets please see Q21 of the frequently asked questions on the website
Specialist Funds
  1. Personal Pensions

    Funds which are only available for use in a personal pension plan or FSAVC (Free Standing Additional Voluntary Contribution) scheme.

    Present arrangements for unit trust personal pension schemes require providers to set up separate personal pension unit trust under an overall tax sheltered umbrella. These funds then in turn invest in the group's equivalent mainstream trusts. Pension funds are not to be confused with "Exempt" funds which are flagged separately.

  2. UK Direct Property

    Funds which invest an average of at least 70% of their assets directly in UK property over 5 year rolling periods.

    Funds will be monitored and those that invest less than 70% of their assets in direct property for any continuous 12 month period or fall below 60% for any month may be removed from the sector.

    Notes:

    1. UK property is defined as real estate located within the UK.

    2. Funds that fail any of the criteria may be removed from the sector.

    3. Funds investing directly in UK property should be balanced[1] funds which generally hold a wide mix of property assets, diversified by type and location. Specialist property funds which focus on specific types of property or on properties within particular geographic regions will be included in the Property Other sector.

    4. Investment in property bricks and mortar can be less liquid than in other asset classes. Investors should satisfy themselves that they understand what any given fund is doing and take account of any liquidity risks set out in a fund’s literature.

    5. If regulation does not set out rules, the Investment Association expect that member firms will follow good practice guidelines when using techniques to value property assets.

    6. Derivative usage should be within the spirit of the sector restrictions and not lead to the economic exposure of the fund being outside the set limits of its sector.

    7. The “spirit” may be considered as being whether a fund’s investments or strategy tends towards the achievement of the overall sector scheme objective of allowing like-for-like comparisons to be made between funds. Managers should note that the user group for sectors should be assumed to be consumers and their advisers. Funds should not rely in making their case on applying a narrow, legalistic or unusual interpretation to what are, in practice, broad definitions.

    8. Newly launched property funds which are intending to invest directly in physical property will be permitted a period of 12 months to come into compliance with the sector definition. The funds will be asked to make an appropriate commitment at the outset to the Investment Association.

    9. Where firms operate a Master-Feeder structure both funds will be classified to the UK Direct Property sector. This may create double counting in both the Investment Association sector averages and rankings if the Master and Feeders are included in the calculations. In this area, Investment Association guidance is that the Feeders should not be included in the calculations. If they are, this should be clearly signalled by data providers to their clients and by firms to their investors.

    [1] Funds are deemed to be either Balanced or Specialist depending mainly on their investor mandates but also with regard to the current composition of their portfolios. In general,

    a. funds will be deemed as Balanced providing that their holdings of either office, retail, industrial or ‘other property’ account for no more than 70% of their portfolio, and

    b. they are also diversified geographically so that no more than 70% of their portfolio is located in any one of the following regions: Central London (comprising the City, mid-town and the West End), Inner London, Outer London, South East, South West, Eastern, East Midlands, West Midlands, Yorkshire & Humberside, North East, North West,Scotland, Wales, Northern Ireland, Offshore UK (Channel Islands & Isle of Man).

    “Portfolio” means the gross asset value of the fund, including cash and other investments.

  3. Property Other

    Funds which predominantly invest in property and do not meet the requirements of the UK Direct Property sector. In order to invest "predominantly" in property that is not UK direct property, funds:

    • invest an average of at least 70% of their assets directly in property over 5 year rolling periods but do not meet the requirements of the UK Direct Property sector; or

    • invest at least 80% of their assets in property securities; or

    • invest at least 80% in a mixture of direct property and property securities

    Notes:

    1. Funds will be flagged as "Direct Property funds", "Property Securities funds" or “Hybrid” funds respectively. The Investment Association will publish this information on its website.

    2. Direct property funds should invest 70% of their assets directly in property over rolling 5 year periods. Funds will be monitored and those that invest less than 70% of their assets in direct property for any continuous 12 month period or fall below 60% for any month may be removed from the sector.

    3. Funds that fail any of the criteria may be removed from the sector.

    4. Property securities are admissible assets within the investment limits indicated if included in an appropriate, independently constructed index.

    5. Property securities held within the 80% limit are intended to be equities.

    6. The Investment Association expect that member firms will follow good practice guidelines when using techniques to value property assets.

    7. Newly launched property funds which are intending to invest directly in physical property will be permitted a period of 12 months to come into compliance with the sector definition. The funds will be asked to make an appropriate commitment at the outset to the Investment Association.

    8. Where firms operate a Master-Feeder structure both funds will be classified to the Property Other sector. This may create double counting in both the Investment Association sector averages and rankings if the Master and Feeders are included in the calculations. In this area, Investment Association guidance is that the Feeders should not be included in the calculations. If they are, this should be clearly signalled by data providers to their clients and by firms to their investors.

    9. The sector includes a wide range of funds which may be investing directly or indirectly in property. For this reason, performance comparisons across the whole sector are inappropriate.

  4. Specialist

    Funds that have an investment universe that is not accommodated by the mainstream sectors. Performance ranking of funds within the sector as a whole is inappropriate, given the diverse nature of its constituents.

  5. Technology & Telecommunications

    Funds which invest at least 80% of their assets in technology and telecommunications sectors as defined by major index providers.

Unclassified
  1. Unclassified

    Funds which do not want to be classified into other Investment Association sectors such as private funds or funds which have been removed from other Investment Association sectors due to non compliance.

    The Investment Association collects static data on these funds and they contribute to the assets and flows data provided in the Investment Association monthly statistics.

Funds Principally Targeting an Outcome
  1. Targeted Absolute Return

    Funds managed with the aim of delivering positive returns in any market conditions, but returns are not guaranteed.

    Funds in this sector may aim to achieve a return that is more demanding than a “greater than zero after fees objective.”



    Funds in this sector must clearly state the timeframe over which they aim to meet their stated objective to allow the Investment Association and investors to make a distinction between funds on this basis. The timeframe must not be longer than three years.


    Notes:

    1. 1 The sector includes a wide range of different types of fund targeting a positive return in any market conditions. Asset selection is at the discretion of the manager. Funds will employ diverse investment strategies designed to deliver a variety of outcomes, and will often use derivatives within the investment process. Amongst other things funds may use different benchmarks, manage to different timeframes and present different risk characteristics. For these reasons, performance comparisons across the whole sector are inappropriate.

    2. 2 Investors should satisfy themselves that they understand what any given fund is doing – and take advice if they are not sure. The Investment Association provides additional information through its website on each fund in the sector. This is intended to assist investors to narrow down the broad universe of funds in the sector by applying search filters of their own choosing, including timeframe.

    3. 3 Returns are made in the base currency of the fund. Investors may be subject to currency losses should the base currency of a fund be different to their domiciled/invested currency. Currently, only funds that are trying to achieve a return in Sterling may be classified to the sector.

    4. 4 Subject to satisfactory compliance with the sector definition, funds are classified to and remain in the sector on the basis of self-election by firms. It is the responsibility of the firm to ensure that any funds in the sector are correctly classified and not better suited to another sector. The determination that firms should apply is that any fund in the sector should be more like-for-like with the objectives set out in the definition than they would be in any other sector.

    5. 5 The Sectors Committee retains the right to move funds that appear to be incorrectly classified.

    6. 6 In a figure that will be refreshed monthly, the Investment Association will record on its website how many times over the preceding 24 months, a fund has failed to deliver a positive return over rolling 12 month periods. [For funds that do not have the 36 month track record necessary, the figure will show how many rolling 12 month periods have failed to deliver a positive return since launch and the total number of months since launch when a figure could be calculated].

    7. 7 The Investment Association will monitor the sector closely with a view to: Determining whether groupings of funds with sufficient communality of objective and timeframe are large enough to merit the creation of sub-sectors where sub-sector performance comparisons and averages may be appropriate; Determining whether there should be rules that lead to the exclusion of funds from the sector on historic performance grounds.
  2. Volatility Managed

    Funds whose objective is to manage their returns within specified volatility* parameters. Outcomes are not guaranteed.


    Timeframes and methodologies for management of volatility may vary from fund to fund.

    *definition of volatility – volatility is one type of risk. It is a measure of the ups and downs of performance of a fund. The higher the volatility, the more uncertainty there is in the returns.


    Specific sector notes:

    1. 1 The sector includes a wide range of funds managing their returns within specified volatility parameters. A fund may form part of a suite of other funds which operate across a risk spectrum set out in terms of volatility. Asset selection is at the discretion of the manager. Funds will employ diverse investment strategies designed to deliver a variety of outcomes, and will often use derivatives within the investment process. Amongst other things funds may use different benchmarks, manage to different timeframes and present different risk characteristics. For these reasons, performance comparisons across the whole sector are invalid and it is recommended that these should not be made.

    2. 2 Investors should satisfy themselves that they understand what any given fund is doing – and take advice if they are not sure. Some funds may only be available to professional investors or through an adviser. Investors are responsible for their own due diligence.

    3. 3 Subject to satisfactory compliance with the sector definition, funds are classified to and remain in the sector on the basis of self-election by firms. It is the responsibility of the firm to ensure that any funds in the sector are correctly classified and not better suited to another sector. The determination that firms should apply is that any fund in the sector should be more like-for-like with the objectives set out in the definition than they would be in any other sector.

    4. 4 The Sectors Committee retains the right to move funds that appear to be incorrectly classified.

    5. 5 Funds in this sector have a primary objective to manage their returns within specified volatility parameters but they may also have additional objectives especially with regard to the generation of income. Volatility Managed funds with a secondary income objective will be flagged at the manager’s request and a list may be provided on request from The Investment Association.

    6. 6 Funds in this sector are expected to publicly* disclose that the fund is managed with the intention to deliver a volatility/risk outcome.

      * Public – disclosure is deemed to be public if made in the KIID or Prospectus; otherwise firms must make disclosure in circumstances in which it is reasonable to believe investors or prospective investors will either receive or be able to access the disclosure. The IA may ask for evidence of such adequate disclosure made outside the KIID or Prospectus.