The Investment Management Association (IMA) and the Association for British Insurers (ABI) have introduced a new naming system.

The changes mean that sectors will now follow the ABI's naming system.

As a result, the Cautious Managed sector will now be known as Mixed Investment 20-60% Shares, the Balanced Managed as Mixed Investment 40-85% Shares and the Active Managed sector will become Flexible Investment.

There is also a Mixed Investment 0-35% Shares sector, previously only an ABI sector.

The sector names are designed to indicate the mixed asset make-up of the funds and the maximum and minimum amount of shares permitted, apart from Flexible Investment, which has neither a minimum or maximum.

The changes have also affected the definitions for each sector, including the percentage exposure to equities, fixed income and cash investments, and currency requirements.

The changes will come into effect from 1 January 2012 and firms will have until the end of April next year to make the necessary changes to their funds.

Maggie Craig, director of Financial Conduct Regulation at the ABI, commented, ‘The sector names will give consumers a better understanding of how their fund might be invested and dropping terms such as “cautious” should encourage the industry to carefully consider the use of such terms in the future.’

Jane Lowe, director of Markets at the IMA, said, ‘The mixed investment sectors clearly communicate a spectrum of options available to consumers. The names provide an at-a-glance look at the funds’ exposure to shares, while investors can get further detail on what they are investing in by studying the definitions.’