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Equity income stars could be moved to new IMA growth & income sector

The Investment Management Association is looking into the possibility of launching a new growth & income sector for equity income funds, potentially including Neil Woodford’s funds, that do not meet the new yield requirements, Money Marketing understands.

Equity income funds have until December 31 to comply with the 110 per cent of the FTSE All-Share yield target or face removal from the equity income classification.

According to the IMA’s own calculations almost half of the funds in the 95-strong sector failed this measurement as of June, with this figure likely to increase taking into account the rest of the year.

Money Marketing understands the IMA is looking at creating a new sector, growth & income, alongside other options such as postponing the deadline due to the current market turmoil or putting funds that do not meet the new requirements into the UK all companies sector.

It is thought any growth & income sector would have a lower yield requirement than the current 110 per cent of the FTSE All-Share yield used by managers in the equity income sector, possibly requiring a yield on the distributable income between 80 per cent and 110 per cent.

If funds were to be moved into another sector for failing to meet yield targets, it is understood their track records would remain intact.

Among the names expected to populate any such new sector, or at the very least be among those kicked out of equity income for failing yield requirements, would be Invesco Perpetual’s Neil Woodford, with both his giant, billion pound portfolios, Jupiter’s Tony Nutt, Bill Mott’s Psigma income and Standard Life Investment’s higher income managed by Karen Robertson.

The combination of just these five funds would amount to some £16bn in assets. Left behind would still be popular managers such as Adrian Frost on the £2.2bn Artemis Income and Jeremy Lang of the £683m Liontrust First Income.

The IMA would not comment.

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