Autif is planning to make more changes to the current bond fund sector classification, due to be imp...
Autif is planning to make more changes to the current bond fund sector classification, due to be implemented by the end of March, writes Jane Wallace.
The UK Gilt sector is to have its definition tightened from a minimum 80% to 90% gilt content.
As reported by Investment Week last November, the current UK General Bond sector will be split into a UK Corporate Bond sector covering investment grade bond funds and a UK Other Bonds sector comprising non-investment grade bond funds.
To qualify for the UK Corporate Bond sector, funds must invest at least 80% of their assets in sterling-denominated investment grade bonds, excluding convertibles. UK Other Bond will contain funds investing at least 20% of their assets in sterling sub-investment grade bonds, convertibles or preference shares.
Other changes will include abolishing the regional specialist sectors and creating a new single specialist sector to cover all funds with either a single country or a single sector investment theme.
Small-cap sectors will be created for North America, Japan and Europe, while ethical funds will be reclassified within the mainstream sectors.
Clarification of the bond sectors goes some way towards meeting concerns voiced by the FSA last December about whether customers truly understood the risk profile of high income products.
The FSA is carrying out research on what consumers understand from advertisements and literature promoting high income products.
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