The Investment Funds Institute of Canada (IFIC) on Friday released the latest update to its voluntary guidelines for fund managers that aim to improve their assessment and disclosure of the historic volatility risk of their funds to clients on a consistent basis.

The latest update includes changes to IFIC’s volatility classification methodology designed to avoid situations in which fund managers could classify funds simply by focusing on short-term volatility. For example, it reports that “a scenario occurred in the past where a fund manager reclassified an Asian Growth Fund from ‘high’ volatility to ‘medium’ volatility by simply looking at the short-term standard deviation figures.”

The guidance has now been revised to avoid this situation by including “point in time” and “rolling averages” standard deviation figures, “to give fund managers an appreciation for the different [standard deviation (SD)] band ranges that are possible,” the IFIC update says.

“The ‘point in time’ column illustrates that during periods of low market volatility, SD band ranges may be lower than the ‘rolling averages’ SD band ranges, which are based on a longer set of historical benchmark data,” the IFIC update adds.

Along with this change, a section of “frequently asked questions” has been added to the guidelines. The guidelines’ introduction has also been revised to gear it towards a wider audience and language has been strengthened in the “methodology” subsection, the IFIC update reports, among other changes.

The French version of the guidelines will be released shortly, the IFIC update notes.