The Investment Management Association (IMA) committee carrying out a review of the Absolute Return sector is divided over whether to change the sector's name, Investment Week, IFAonline's sister title, reports.
It is understood some fund groups are concerned they will open the door to mis-selling allegations if they are forced to strip the words ‘absolute return’ out of their propositions.
Meanwhile, other fund group committee members are lobbying to rename the sector, but to date have not offered any viable alternatives.
The dispute is expected to result in the review being delayed once again, until the second half of the year.
Last summer the IMA pushed back its review, slated for completion by the end of 2011, affirming it would be finished in the first half of 2012.
“The committee is completely split about whether to change the sector’s name, but no solutions as to what the new name could be are being brought to the table either,” said one source.
“Some fund groups are worried investors could argue the ‘absolute return’ concept has been mis-sold if the name is changed, and there would also be a sizeable cost involved if all funds are forced into changing their names.”
A spokesperson for the IMA refused to comment on internal discussions, but did indicate the sector review will rumble on until the second half of the year.
“At this stage it is very unlikely the review will be completed by the end of June, as we need to do more research,” the IMA said.
Absolute return funds have faced a barrage of criticism for their performance in recent years. Last year only eight of the 65 funds in the Absolute Return sector managed to produce returns above inflation, albeit in tough trading conditions for the majority of asset classes.
The sector has also been accused of being too opaque, with a wide disparity of risk characteristics as funds invest in a variety of different assets. This was one of the main drivers behind Morningstar’s move to scrap its absolute return sector in favour of 18 different alternative investment categories last September.
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