The Investment Association’s (IA) drawn-out UK Equity Income sector rules review is nearing its end, with the body set to recommend lowering the yield requirement, Investment Adviser understands.
In a meeting later this month, the trade body will propose the yield test be changed so funds must match the FTSE All-Share yield across three years, and achieve a 90 per cent level over one year, rather than the current 110 per cent requirement.
A source close to the decision suggested funds may no longer be thrown out of the sector if they fail this test. Instead, providers will now be required to disclose in their own literature whether they meet the one- and three-year requirements.
The IA began consulting members on possible changes in April. The review was then extended to advisers and consumers due to a lack of consensus.
It is understood that the change could be announced before the end of the year if the proposals are agreed by the trade body’s governance committee.
The consultation was initiated in an effort to introduce a more “transparent” way of monitoring how funds generate income, as the IA acknowledged the “controversy” which has seen 20 funds ejected from the sector since 2013.
In October Investment Adviser reported the trade body was considering creating two separate UK Equity Income sectors as a solution. This policy is thought to have been dropped due to a lack of support.
A spokesperson for the IA said: “The UKEI discussion is ongoing and we will communicate any changes in due course.”
