Break out the common sense

The fund management industry is doing its best to dig the IMA out of the rather embarrassing hole it constructed for itself with its alphabet approach to the Managed sectors. At last, common sense is in danger of breaking out.

While the long-term damage to the industry is negligible, it is symptomatic of one of the industry’s biggest failings – its inability to explain itself to ordinary investors. Last week, both Fidelity and Rathbones – the equivalent in investment terms of a behemoth and a boutique – came up with suggestions to base future classifications on risk. As Rathbones said, managed funds play an important role in the advisory process, but there is always the risk a client will buy a fund that does not match their risk/return requirements. This is often compounded by the fact some managers run...