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IMA revises yield requirement for UK equity income

Advisers and fund managers have welcomed the Investment Management Association’s changes to its UK equity income and UK bond and income sector definitions.

Funds in the UK equity income sector must now reassess the way yield is calculated, with the aim to achieve in excess of 110 per cent of the distributable income of the FTSE All Share yield.

Hargreaves Lansdown investment manager Ben Yearsley says the move away from attaining yield from the underlying portfolio to 110 per cent of distributable income is a positive step.

He says: “By adding the dividend taken for the year and dividing it by the unit price, it will mean no questions about differing funds in the sector.

“I just hope the IMA not only gives managers time to adjust but sticks to its plan if firms fail to do so by eventually moving them out of the sector if the vehicle is unsuitable.”

Lawrence House head of multi-manager Alan Stokes says: “I agree that clarification is being helped by using this method but there are still questions that need to be answered and that will only happen once we see the knock-on effect on the sector.”

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