Chatfeild-Roberts says he would have preferred a 100 per cent FTSE All-Share yield requirement rather than insisting on 110 per cent.
The IMA is expected to announce which funds will be moved from the UK equity income sector imminently, with over 20 funds set to shift.
Chatfeild-Roberts says many managers have already been hit by holding banks which have seen dividends evaporate.
He says seven companies are expected to account for 50 per cent of dividends in the UK market, making portfolio convergence a likelihood.
He says: “There is a dwindling pool of quality stocks that pay dividends and if managers feel forced to invest in these to get income regardless of valuation, you are going to get income funds in that sector looking similar and potentially creating a nasty bubble in the market.”
Chatfeild-Roberts’ views follow on from the views of PSigma income manager Bill Mott, who warns that while the IMA’s decision to calculate yields on a 12-month basis is fair, judging where to get the sufficient yield will be difficult, given expected cuts to company dividends.
Chatfeild-Roberts has also questioned corporate bonds, saying they may offer better returns than cash but will carry significant risks.
He says: “You have to remember that a lot of corporate bond funds lost a lot of money last year. I would be very cautious of those funds that have a heavy financials weighting, particu- larly lower-quality bank debt.”
The IMA says it is unable to comment as its work is ongoing.