Interactive Investor

Investment Association launches consultation on global bonds

The IA proposes the division of the 193-strong Global Bonds sector into 10 new sectors.

10th September 2020 17:24

Dzmitry Lipski from interactive investor

The IA proposes the division of the 193-strong Global Bonds sector into 10 new sectors.

Interactive investor comments on the launch of IA consultation on Global Bonds sector.

The Investment Association (IA) has today launched a consultation into the future of its Global Bonds sector, proposing the division of the 193-strong Global Bonds sector into 10 new sectors.

The IA claims the move will help investors and advisers better compare global bond funds based on the following criteria:

  • Type of bond, for example, government bond, corporate bond
  • Credit type, for example, investment grade, high yield, mixed
  • Currency focus, for example, USD, euro or multi-currency

Dzmitry Lipski, head of funds research at interactive investor, says: “The Global Bonds sector has evolved into a  varied sector featuring funds from the relatively vanilla and safe, to the sophisticated and esoteric that makes use of derivatives to help investment objectives.

“The sector has become increasingly bloated and is overdue a slimming down to create sub-sectors to help investors better navigate between the different options and make apples to apples comparisons. This will hopefully give them a better understanding of what they are getting into. Bonds are not easy – the more investors appreciate this and the different risk profiles, the better.

“In that sense, the sheer diversity of the sector as it stands at the moment could be seen as an accident waiting to happen. It may be no coincidence that the consultation curiously follows an increase in demand for globally diversified bond funds to serve as a buffer against the highly volatile equity market during the coronavirus crisis. The IA’s latest figures show that bond funds saw net retail sales of £1.8 billion in July and the Global Bond sector was the best-selling sector with £693 million invested. Not all global funds are made the same and they should be categorised accordingly to ensure that consumers know exactly what they are investing in and how to benchmark performance.”

 

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