Have your say on the yield targets of equity income funds

More than 20 funds have been ejected from the IA UK Equity Income sector in recent months, as they have fallen foul of the yield requirements (110% of the yield of the FTSE All Share).

Amongst these funds are Evenlode Income and Rathbone Income, both of which are in the Chelsea Selection. Both funds have been moved to the IA UK All Companies sector.

Having consulted with fund management companies earlier this year, the Investment Association (the industry representative body) has announced that it will now ask investors (via a YouGov survey later in the year) and intermediaries for their views on the subject. Specifically, asking how they identify UK equity income funds and whether the current definition of the sector is helpful in supporting their objectives.

The results of the research will help them decide between the following three options:

Option 1: make no changes
Option 2: replace the current 110% yield requirement with a simple requirement to generate a yield higher than the FTSE All Share market over 3 year rolling periods.
Option 3: ask funds for specific disclosure in relation to income generated – or in other words, just make the yield objective of the fund more transparent.

As an intermediary, Chelsea will be sharing their thoughts with the Investment Association. If you would like us to add your thoughts to our submission, please email info@chelseafs.co.uk by Friday 26th August 2016.

Alternatively, our sister company, FundCalibre, has a simple poll on its home page: www.fundcalibre.com