Investment firms should be clear on gearing figures

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INVESTMENT companies should improve the way they disclose gearing in the future, showing their long-term practices as well as current statistics.

The Association of Investment Companies (AIC), which was founded in 1932, has made three recommendations for the way its members should present their gearing information for comparison.

Firstly, they should publish a primary, consistently calculated measure of gearing, expressed as a simple percentage.

The second recommendation is to use a table or graph to show the maximum and minimum levels of gearing a company has had over at least the past five years.

Finally, they should provide a gearing range showing the maximum and minimum levels of gearing it would expect in normal market conditions. Ian Sayers, director general of the AIC, said: “Gearing is one of the defining characteristics of the investment company sec-tor.

“Through initiatives like the AIC’s adviser training programme, today’s advisers seem much more comfortable with the concept of gearing. 

“But they also need a clear picture of an individual company’s approach to gearing to help ensure it is appropriate for their clients’ risk profile. 

“Advisers have told us that they want to know how highly geared a company is today, how gearing has been managed in the past, and where it may go to in the future.

“We believe these recommendations will help our members provide this information to advisers and investors in a more consistent and helpful way.”