The Canadian Investment Funds Standards Committee (CIFSC) today launched an updated and more consumer-friendly categorization process for Canadian retail investment funds. It takes effect as of the July 31 data reporting period.
CIFSC has been the industry standard classification system since 1998 and is committed to the process of continuous improvement. Each year CIFSC reviews and enhances its categories and classification process to benefit all participants, including the investment fund industry, advisors and investors.
This year’s enhancements come after considerable analysis of industry trends, modelling and back-testing potential categories and extensive consultation with participants in the insurance and mutual fund industry, including IFIC’s CIFSC Liaison Committee, whose members include the largest fund companies in Canada. The result is a process and set of categories that continue to enhance the consistency and transparency of the CIFSC classification system.
This effort is represented by way of a straightforward process diagram in addition to updated text-based definitions, enabling fund participants, advisors and investors to better understand what characteristics make up a particular fund category, said CIFSC Chair Ralf Hensel. “This new diagram shows visually how the process works and is more intuitive, while remaining true to our goal of an objective measurement standard,” said Hensel. In addition, improvements have been made to the categories themselves, refining the groups into which funds are classified based on their investment mandates and three-year median holdings data.
The categorization process begins by classifying funds into broad asset categories, which are then further divided by regional, sector and concentration “tests.” The process diagram is available on the CIFSC website (cifsc.org) along with the accompanying, revised text-based definitions.
Additional categories were developed to take recent fund trends into account. One of these new categories, Canadian Focus Equity, groups funds that are increasing their foreign content, but that still hold more than half their assets in Canadian equities, with the balance outside of Canada and the U.S.
“CIFSC’s mandate is a balance — categorizing funds consistently and objectively, based on their mandates and historical holdings, being mindful of developing trends,” said Hensel. “After the elimination of the foreign content restrictions last summer, a significant number of funds have not so far substantially increased their foreign content. Those that have or wish to now have a category that respects that they are still primarily Canadian funds.”
Hensel said the volunteer organization, made up of competing, yet collaborative organizations, is committed to the goal of a single, unbiased and standardized classification system for use across Canada. CIFSC’s members all agree to one set of categories that are intended to be the basic level of classifications for investment funds. Many of the data providers then further differentiate the funds in those categories based on deeper analysis that may be offered in their specific commercial products.
CIFSC current membership includes representatives from Cannex Financial Exchanges, FP Datagroup, Fundata Canada, The Globe and Mail, IFIC, Proteus Performance Management, independent investment and legal consultants and its newest member, the Canadian Life and Health Insurance Association.
For further information, contact:
Ralf Hensel, Chair of CIFSC,
416-363-2150 ext. 254
More information on CIFSC and on its activities can be found at:http://www.cifsc.org/
For comments on the new categories or other matters, the committee can be reached via email at:http://www.cifsc.org/contact/