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Bond fund yields in confusion as arithmetic alters

Fund managers are attacking rivals for not applying Autif&#39s new corporate bond fund yield calculation, claiming there is an uneven playing field in the UK fixed-income sector.

Yield calculations were due to be standardised from September 1 but not all fund managers have made the necessary changes. Quoted figures now vary dramatically, potentially giving some an unfair advantage when marketing their product to investors and IFAs.

Although the FSA has backed the changes, it says it will only monitor the situation, as the guidelines are not backed by its regulations.

The rules require calculations to be based on gross redemption yields, taking into account management fees and initial charges over 10 years.

Using the new guidelines, Schroder&#39s high-yield bond fund has a published yield of just 4.47 per cent compared with 7.7 per cent before September 1. But Baring Asset Management&#39s corporate bond fund is still publishing its August yield of 7.3 per cent although BAM claims it is in the process of converting to the new system.

Of the firms that have complied with the new guidelines, several believe Autif&#39s method is more confusing for the consumer than before.

Newton Fund Managers head of fixed income Sarah Morrissey says: “The new figure is not what the actual investor is getting paid in income. We will go by the book but I do not think this debate is over.”

Autif director of communications Anne McMeehan says: “Fund managers are suggesting that a holy grail is achievable. If they have that calculation, I would be happy to take a look at it. This is not a situation where you can please everyone.”

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