Renaming of Absolute Return Sector an Absolute Farce
Commenting on the IMA’s review of the Absolute Return Sector Gina Miller, founder of the True and Fair campaign and co-founder of SCM Private said:
“It has taken the IMA nearly two years (643 days – 26th May 2011 to 27th February 2013) to come up with a single word – targeted. So now the ‘absolute return sector’ will become the ‘targeted absolute return sector.’
Under the new definition ‘Funds in this sector may aim to achieve a return that is more demanding than a “greater than zero after fees” objective.’ Is there much point in a fund not aiming to deliver positive returns?
Posted By: True and Fair, 5:43 pm
Furthermore “Funds must be managed with the aim of delivering positive returns in any market conditions, but returns are not guaranteed.’ Is it not clearly misleading to infer to consumers that positive returns can be delivered in ANY market conditions?
This is a total disgrace and shows that the IMA is simply not fit to carry out such an important task on behalf of investors.
“SCM Private has calculated that the amount of money lost in Absolute Return funds that have failed to deliver positive returns in the last two years amounts to approximately £386 million*. Will the IMA or its members be compensating any investors who have been misled by the IMA to expect an absolute return?”
“We should welcome the fact that the IMA has at least undertaken to finally look at one of its most appalling examples of product mis-labeling. But baby steps are not enough. If the IMA cannot sort out issues that negatively affects investor’s financial health, the role should go to an independent organisation.
*SCM Private looked at individual calendar year performance of the IMA Absolute Return Sector Funds during 2011 and 2012. It then looked at any fund which produced a negative return in either 2011 or 2012 and calculated based on the fund value at the end of 2010 and 2011, the implied losses incurred by these funds during each calendar year.
The True and Fair Code
Company XYZ commits to providing clients with a full breakdown of all fees incurred during the investment of their money, including management fees and all underlying costs or charges.
Company XYZ commits to providing clients with a full online breakdown of all holdings held directly, as well as indirectly (e.g. individual assets held as collateral against securities lent out), together with a full percentage breakdown, online, on at least a quarterly basis.