The Investment Association announced the launch of the new sector recently. It will contain 83 funds with the objective of managing returns within specified volatility parameters. These funds have combined assets under management of £19.3 billion.

Laith Khalaf, senior analyst, Hargreaves Lansdown, said: “This new sector isn’t going to be a great deal of use for investors, because the funds in it are going to be targeting very different levels of risk, so comparisons drawn will be between apples and pears.

“Investors should be wary of relying too heavily on sector classifications, and should try to understand the investment approach of the managers they are investing with, so they have a handle on the conditions under which the fund will do well, and when it can be expected to fall behind the pack, as all active managers underperform at some point.”

Mr Khalaf forecast that low volatility funds will be at the top of the sector when markets are in turmoil and higher volatility funds will be at the top when market are riding high so relative performance statistics will tell little about the skill of the fund manager and “more about how much risk they are taking on.”

He added that this would not be the only sector suffering this problem and said he believed the Absolute Return, Specialist and Unclassified sectors were “similarly inscrutable” unless investors can delve into what each fund is trying to achieve and how well it has performed against its own specific targets.

He cited the example of one of the biggest sectors, UK Equity Income sector, which has had to widen its parameters to allow some big funds back in although the added flexibility was not enough for Neil Woodford, who launched his new Income Focus fund into the Specialist sector.

HL was founded in Bristol in 1981 and administers over £70 billion of client assets on behalf of 876,000 investors.