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2009 Forecast to be the year of income

BNY Mellon Asset Management head of distribution Paul Feeney believes the UK fund industry may contract by 20 per cent in the credit crunch and that 2009 will be the year of income.

Feeney says firms will be forced to look across their ranges and ask whether all their funds are needed, particularly with the growth of esoteric offerings not suited to current market conditions.

He says there are funds in the UK market not appropriate for UK retail investors that have been “riding a wave” such as open-ended physical property funds.

He says: “Everyone wanted these products but when the equity market falls, they are still liquid. However, when property markets fall and your offering has 30 physical property offerings in it, the market freezes and there is no liquidity despite the fact that you have provided people with an open-ended fund where you have said you can come out on a daily basis.”

Feeney believes that there will be a “back to basics” style of investment next year, with income likely to be one of the popular market choices.

He says: “Markets will move away from the financial engineering we have seen and move back to what they were intended to do and that is the reinvestment of dividend. Income is at the heart of this and I believe that people are realising that if they can get capital growth and strong yields, they will be attractive. It is also important to note that income will come from both the east and the west.”

Skerritt Financial Consultants head of investments Andy Merricks says: “I would favour corporate bonds for income as reinvesting yields will become more prominent. I feel UK equity income is to be avoided at present as it faces more cuts in yields.”

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