|
|
 |
 |
|
 |
|
| |
|
|
Changes to IMA fixed income sectors |
| |
|
|
Following a recent review of its fixed income sectors, the Investment Management Association (IMA) has made the following changes, which will come in to effect on 1st September 2008: |
| |
|
The UK Gilts and UK Index Linked Gilts sectors will adopt revised definitions which bring convergence with ABI sector definitions. The UK Corporate Bond and UK Other Bond sectors will be split in to three new sectors, to be named £ Corporate Bond, £ Strategic Bond and £ High Yield. The Global Bond definition will remain the same. The notes providing guidance on the definitions have also been expanded.
The new definitions will be as follows:
UK Gilts
Funds which invest at least 95% of their assets in Sterling denominated (or hedged back to Sterling) triple AAA rated, government backed securities, with at least 80% invested in UK government securities (Gilts).
UK Index Linked Gilts
Funds which invest at least 95% of their assets in Sterling denominated (or hedged back to Sterling) triple AAA rated government backed index linked securities, with at least 80% invested in UK Index Linked Gilts.
£ Corporate Bond
Funds which invest at least 80% of their assets in Sterling denominated (or hedged back to Sterling), Triple BBB minus or above corporate bond securities (as measured by Standard & Poors or an equivalent external rating agency). This excludes convertibles, preference shares and permanent interest bearing shares (PIBs).
£ Strategic Bond
Funds which invest at least 80% of their assets in Sterling denominated (or hedged back to Sterling) fixed interest securities. This includes convertibles, preference shares and permanent interest bearing shares (PIBs). At any point in time the asset allocation of these funds could theoretically place the fund in one of the other Fixed Interest sectors. The funds will remain in this sector on these occasions since it is the Manager's stated intention to retain the right to invest across the Sterling Fixed Interest credit risk spectrum.
£ High Yield
Funds which invest at least 80% of their assets in Sterling denominated (or hedged back to Sterling) fixed interest securities and at least 50% of their assets in below BBB minus fixed interest securities (as measured by Standard and Poors or an equivalent external rating agency), including convertibles, preference shares and permanent interest bearing shares (PIBs).
Global Bonds
Funds which invest at least 80% of their assets in fixed interest stocks. All funds which contain more than 80% fixed interest investments are to be classified under this heading regardless of the fact that they may have more than 80% in a particular geographic sector, unless that geographic area is the UK, when the fund should be classified under the relevant UK heading.
The following notes will apply to the new fixed income sector definitions:
1. Across all Fixed Income sectors there is no prescription within the non core parameters. Firms are reminded that, whilst the sectors provide freedom in respect of investment in the non-core element of the definitions, the investment strategy adopted must be transparent to the end customer, appropriate to deliver on the fund objective and take account of the firm's TCF obligations.
2. Convertibles, preference shares and permanent interest bearing shares (PIBs) would be excluded from the investment grade and government percentage in the sector classifications. This will allow a small holding in these instruments in the higher quality funds, and not inhibit investment in them for the higher risk/higher return funds.
3. Where ratings of a bond differ between the rating agencies it is for the firm to decide which rating is relevant, taking account of their own assessment of the security of the bond. Consideration should be given to what would result from the most cautious interpretation or if an average of the ratings were adopted.
4. Derivative usage should be within the spirit of the sector restrictions and not lead to the actual exposure of the fund being outside the set limits of its sector. This will be self policed (for now). The IMA does not wish to inhibit funds from using their full UCITS III powers, whilst recognizing the limitations on monitoring at the present time.
5. In the gilt/bond sectors, a security with 0-3 months to maturity will be treated as cash. Securities maturing within 3-12 months will be treated as bonds
|
| |
|
|
|
|
|
|
|
|
|
