Invesco says the IMA’s call to re-assess the UK equity income sector forces managers to focus on short-term yield at the expense of the long-term balance between income generation and capital growth.
Invesco has maintained that Woodford’s investment horizon has always been between 5 and 10 years and that his philosophy will not change as a result of the IMA UK equity income rule changes.
On Monday, Money Marketing Online revealed that the IMA is to launch a new UK income and growth sector as of January 1, 2009, in a bid to accommodate funds struggling to meet its UK equity income yield requirement.
The move comes following research from the trade body which has established that many funds in the sector are not in compliance with the current yield target of 110 per cent of the FTSE all-share and are unlikely to reach that target by the end of year deadline.
The IMA plans to remove all UK equity income funds that fail the yield test on a review of the past 12 months from December 31, 2008. Those that fail will move into the UK equity income and growth sector, provided that they meet the sectors own definition, which is that funds invest at least 80 per cent of their assets in UK equities and aim to produce a historic yield of 90 to 110 per cent of the FTSE all-share yield at the fund’s year end.
Invesco Perpetual head of distribution Ian Trevers says: “Whilst we acknowledge the desire from certain parts of the industry for simple annual yield testing within the Equity Income sector, we do not believe that the interests of our clients in these particular funds are best served by focussing on such a short timeframe.”
“I would like to reassure our clients and their advisers that this sector change will not impact the way their investments are managed. We will continue to aim to provide investors with a growing level of income balanced with the opportunity for capital growth over the long term.
“Neil Woodford has long been one of the most successful investors in the UK Equity Income sector. Not only do the funds that he manages top their peer group for total return over 10 years but they have also delivered more income to clients over that period than 46 of the 54 funds in the sector. “
Hargreaves Lansdown senior analyst Meera Patel says: “We think Jupiter income may move sector but some of the other big boys like Artemis and PSigma should be fine. It is a good move by Invesco on the back of a questionable move to split the IMA equity income sector, which has been led by fund firms who are not happy with performance questions being brought about because they chase higher yields.”