High volatility spotted in UK retail funds

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A research from the online investment platform Rplan.co.uk reveals that of over 2,000 retail mutual funds available in the UK, 40% have the second highest ranking of 6 for volatility –annualised volatility of between 15% and 24.99%.

A further 25% of funds have the third highest ranking of 5 (annualised volatility of between 10% and 14.99%).

Rplan.co.uk’s research reveals that 44% of retail investors describe the explanation given by fund managers for the level of risk associated with their funds as either ‘very unclear’ (9%) or ‘not very clear’ (35%). Only 12% described it as ‘very clear.’

Given this, the online investment platform is calling for the fund management industry to ensure the risk rating of their products is more prevalent on their literature.

All funds marketed in Europe have to use the Synthetic Risk and Reward Indicator (SRRI), which measures the volatility of the fund from 1(the lowest) to 7 (the highest). A higher volatility means greater uncertainty about the size of the changes in a fund’s value.

The Synthetic Risk and Reward Indicator (SRRI) was defined in 2009 by the Committee of European Securities Regulators (CESR) with the aim of providing investors with a method of assessing a fund’s risk.

Stuart Dyer, Rplan.co.uk’s CIO, said: “We were surprised to see such a high percentage of funds with the second highest possible ranking for volatility.  There needs to be much greater clarity as to what level of risk and volatility funds have and although all funds have to provide their SRRI volatility rating, this needs to be more prevalent in investor communication documents.  The industry should be much more transparent about this.  We, for example, promote this very clearly for all of the funds on our platform, along with their charges.”


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