Equity IncomeAug 21 2017

Montanaro adds to UK income fund divergence

Search sponsored by
Montanaro adds to UK income fund divergence
ByTaha Lokhandwala

UK equity income funds are set to remain spread across a number of Investment Association (IA) sectors despite the trade body’s overhaul of rules for its income grouping.

Montanaro Asset Management has said it will not return its £200m UK Income fund to the sector, despite the IA having relaxed the yield requirements which saw the fund ejected in May 2016. It joins other prominent funds, such as those run by Invesco Perpetual’s Mark Barnett, in remaining elsewhere in the UK universe.

Invesco has returned its £532m Income & Growth to the sector, but Mr Barnett’s flagship Income, High Income and UK Strategic Income strategies remain in the UK All Companies sector. Charles Montanaro’s fund will also remain in the broader UK grouping. The move follows on from Neil Woodford’s decision to situate his Income Focus fund in the Specialist sector upon launch this April.

Close to 20 funds had been removed by the IA between 2013 and 2016 for failing to meet a requirement to yield more than 10 per cent of the FTSE All-Share over rolling three-year periods. Rathbones, Henderson and Schroders returned their funds to the sector once the rules were eased this year, and other strategies have either closed or merged.

The IA said its rule changes  would create “better visibility” for investors. Funds must only match the yield of the All-Share rather than beat it – a decision reached without consensus after a 12-month consultation.