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&#39Half of all income funds fail on yields&#39

Almost half of equity income funds are falling foul of Autif sector definitions by stating no intention to increase their funds&#39 yields.

The findings, revealed by investment selection service Shouts, show that 34 of the 70 equity income funds which have a five-year track record do not aim to grow their yield while only 20 per cent of income funds link their yield objectives to the FTSE All-share index.

This is despite Autif equity income sector definitions, which specify that income funds must aim to yield at least 10 per cent more than the FTSE All-share and as a main investment objective should look to generate a growing income.

The research also identified the sector as a minefield of poor performers, with only 13 of the 70 funds having managed to increase their yield over each of the past five years.

Of these, Shouts highlights that only five funds have increased the yield by more than 50 per cent over the entire five-year period.

Equity income funds have been among the best sellers of the past year following several months of strong performance.

However, many funds in the sector do not adhere to their guidelines and may be more fairly classified in the UK all companies sector.

Bates Investment head of research James Dalby says: “The equity income sector is always a valuable consideration for client portfolios and as a buying opportunity it still looks good at the moment.

“But, like any sector,you have got to pick your funds well.”


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