The IMA's new Strategic Bond sector is a step in the right direction but it will not replace the need for financial advice, warns F&C bond manager Fatima Luis.
The firm has moved Luis' F&C Extra Income and Strategic Bond funds to the new sector which launched today with 65 funds.
Luis welcomed the new sector: “The previous bond fund sectors encompassed too many different types of portfolios within the same sectors which made like-for-like comparisons difficult for potential investors."
“In particular, we welcome the introduction of a new IMA Strategic Bond classification which confirms the growing importance of bond products with flexible mandates to shift across the credit spectrum in an ever-changing market."
However, she emphasises investors still need to differentiate between the varying mandates of funds within the new sectors.
“Investors should understand that the new sectors are not a panacea which replaces the need for detailed understanding of the features of each specific product,” she says.
For example, Luis' Strategic Bond fund has the flexibility to invest across the credit spectrum in pursuit of total return but her Extra Income Bond fund, in the same sector, has a 50/50 split between investment grade and high yield.
Rules for the Strategic Bond sector will allow funds to invest up to 20% in equities which in certain periods could propel hybrid fund to the top of the tables compared to pure bond products and would therefore not be a like-for-like comparison, she argues.
“The old adage of caveat emptor remains as relevant as ever and the new categorisations, while clearly welcome overall, will certainly not replace the need for well researched, discerning independent financial advice.”IFAonline
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