Investors have been issued a warning on high-income investment funds by the Financial Services Authority.
The alert is the second in two weeks as the regulator said investors “should not be taken in by the headline income.”
The caution follows an increase in demand for high-income investment products created in the current climate of low inflation and low interest rates. Investors have been switching from savings accounts with a ceiling of 6 per cent returns to income funds expecting 10 per cent returns.
The FSA has been concerned investors are not aware of the risks of losing capital when opting for high-yield funds. These include small company and technology investments which the FSA raised fears about last week.
Schroder Investment Management head of client services Robin Stoakley says: “The fact is some investors are taken in by the headline and do not read the small print.”