The UK-based advisory firm AWD Chase de Vere has said it disapproves of the Investment Management Association for "protecting its own interests" in its decision to make no changes to its absolute return funds sector after an annual review.

“It is likely that many investors don’t understand fully what they have bought. The name absolute return gives the impression of security and implies that funds will give positive returns in all environments. This is not proving to be the case,” said Patrick Connolly, head of communications at AWD Chase de Vere.

While thus far in 2010 the average absolute return fund has only fallen in value by 0.1 per cent, the Octopus UK Absolute Equity Fund has reportedly lost 18.2 per cent, and other firms using the absolute return label, such as Cazenove, Ignis, Baring and Gartmore have made quite significant losses, according to the IFA's statement.

AWD Chase de Vere expressed concern over the misleading quality of the title of the fund itself.

"The ‘absolute return’ name is an important selling point and so investment companies will not want this changed... Absolute return funds should be renamed. If they are simply diversified funds then call them diversified or multi-asset funds. If they use hedge strategies then call them hedge funds. This will give investors a better understanding of where they are invested and a more realistic expectation of likely returns,” Connolly said.

The IMA review stated that there was considerable discussion about sub-categorising the sector but this was decided against as the sector wasn’t seen as being mature or large enough.

The absolute return fund category was the first IMA sector to accept offshore funds. There are 48 funds in the sector with a total of £13.6 billion ($21.1 billion) under management. Ten are offshore funds with £1.2 billion of funds under management. 

The IMA was unavailable to comment when contacted by this publication for comment.