by Nick Britton
Nick Britton
Nobody launches a sector review for a laugh. Like recarpeting your bedroom, you’ll only overhaul your sectors every now and again.
The last occasion was in 2014, when the AIC aligned some of its sector names to the Investment Association’s, to allow investors to ‘look across’ open-ended and closed-ended funds when selecting, let’s say, a UK equity income fund.
But full alignment with open-ended sectors isn’t possible, chiefly because closed-ended funds invest in such a wide range of things that simply don’t appear in the open-ended universe.
The portion of investment company assets invested in alternatives has expanded from around one-fifth 20 years ago, to nearly half today. The rate of change over the past ten years or so has been particularly rapid, as new asset classes have proliferated like dairy alternatives in your local supermarket (hemp milk, anyone?)
The debt sector is a perfect example. Created in 2006, it has ballooned to 30 companies, investing in everything from convertibles to CLOs, mortgages to P2P loans. In fact, it is the second largest AIC sector by number of companies (following VCT Generalist, which has 39).
So we’ve broken it up. Companies in the current Debt sector will migrate to four new sectors: Debt – Direct Lending, Debt – Loans & Bonds, Debt – Structured Finance and Property – Debt – allowing investors to better understand what the different companies are investing in, and compare them more readily against their peers.
That’s not to say it was an easy process. There’s more than one way to skin a cat, and considerably more ways than that to subdivide the debt sector. Different suggestions were considered, and their merits weighed carefully before the final decision was reached.
If you’re still reading, I’m guessing you’re really interested in the AIC’s sector review. So I can tell you that it was all overseen by the AIC’s Statistics Committee, a dedicated body of top analysts, brokers and other industry experts who meet regularly to discuss data, and our indefatigable Statistics Director, David Michael. Their deliberations are informed by close consultation with the AIC’s 359-strong membership.
Not everything has changed, and not all changes are radical. But cosmetic changes can still be very welcome. I, for one, will be glad never again to have to refer to the “Sector Specialist: Infrastructure – Renewable Energy” sector. Its new name, “Renewable Energy Infrastructure”, is a vast improvement.
Reflecting on the sector changes as a whole, I’m struck with the biblical truth that there is nothing new under the sun. For example, our new Royalties sector recalls some of the earliest investment companies that invested in mineral rights. Renewable Energy Infrastructure may be new – but infrastructure most certainly isn’t: an investor of 1880 could have bought shares in the Globe Telegraph and Trust Company, the Railway Debenture Trust or the Submarine Cables Trust. And you only have to think for a moment about the name of Scottish Mortgage Investment Trust (launched in 1909) to realise that our Property – Debt sector is not breaking entirely new ground.
As for the new debt sectors, the instruments may be new but the idea of pooling investors’ funds to invest in loans and bonds goes back to the first investment company of all, F&C Investment Trust, launched in 1868.
So, perhaps the correct response to the AIC’s sector review is not the battle-cry of “Vive la révolution!” but a classic Gallic shrug as we mutter, “Plus ça change, plus c'est la même chose…”
Nick Britton, Head of Intermediary Communications, AIC
P.S. Last night, the AIC’s communications team were delighted to collect the award for Press Team of the Year at the Headline Money Awards. It’s a proud personal moment for us, but more importantly, a boost for investment companies as we continue our mission to make them better understood and more widely used.
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