“For income funds, they know they must meet the IA’s explicit requirement, but as prices go up there has been yield compression. The way the methodology is calculated could be updated to what a lot of the fund managers and end-investors want from a UK equity income fund, which is dividend growth and not just searching for yield at all costs.”
Digging deeper
For Haynes, the disparity of the UK All Companies sector makes it difficult to compare individual funds without digging a lot deeper.
Adrian Lowcock, head of investing at AXA Self Investor, poses the question to UK investors today as do you really know what risk you are taking?
“For a mid-cap fund you may actually be investing in fund which buys into smaller companies, whereas in the equity income space, if you invest in a fund that has been kicked out of the UK Equity Income sector you could be buying a fund that has chosen to take on less risk, i.e. it is not buying the bond proxies or high-yield stocks for the sake of it.”
