GAM's North American Growth fund, run by Gordon Grender, has averted an exit into the IMA's unclassi...
GAM's North American Growth fund, run by Gordon Grender, has averted an exit into the IMA's unclassified sector by taking its US equity exposure from 58% back to the required 80%.
A combination of significant inflows, which saw the fund grow from £28.1m in March to £44.4m in November, and poor market conditions resulted in Grender's cash position rising to nearly 42% by the end of November.
Martin Harrison, director of mutual funds at GAM, said the fund has an emphasis on smaller companies. Difficult market conditions have led to a dearth of short-term buying opportunities in US small caps and, as such, Grender wanted to hang on to the cash in the short term.
Harrison said: 'Cash was never intended to be a long-term position. For the vast majority of time since its launch in 1985, the fund has been nearly fully invested.'
The fund's high cash weighting was spotted in early November by the IMA's performance category review committee, which meets monthly to review the sectors.
Grender was given four weeks with a deadline of 13 December to correct his cash position or be expelled from the sector and placed in the association's new unclassified sector.
Funds placed in the unclassified sector do not immediately lose their track record. However, performance would become meaningless to the market in a sector in which comparisons would not be like for like. Once the situation is corrected and a fund is moved back to its original sector, its former track record is no longer applicable.
The unclassified sector is split into two categories: funds that do not want to be classified and funds that are placed into it for breaking the rules. As yet, no funds have been thrown into the sector, while there are 20 mainly institutional or private funds that do not want to be classified.
Dorian Carrell, head of statistics at the IMA, said the association is not trying to punish active managers through sector policing but it is trying to protect investors. He added: 'If an investor wants to invest in the Far East, they will enter a fund in the expectation it will mainly invest in Far Eastern equities. If they want to invest in cash, that is their decision, not the fund manager's.'
What made financial headlines over the weekend?
To promote 'long-term investment'
Switching 'hard and expensive'
Smaller funds still packing a punch