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Fund managers ‘must do more to boost income transparency’

Asset managers need to do more to increase access to payout information on income funds, experts argue, despite work by the Investment Association to push fund groups to be more transparent.

The IA, working with the FCA, launched a new Statement of Recommended Practice for accounts for the period ending 31 December 2015.

The SORP requirements, set by the IA and enforced by the FCA, mean fund groups must distinguish revenue from capital and state the distribution per unit of the fund.

But experts claim it is still not easy to access historic distribution payments from income funds or assess how sustainable these payouts are.

Chelsea Financial Services managing director Darius McDermott says income data is not easily accessible.

He says: “Income history is hard to find. Income history should be more transparent, but it isn’t. Groups need to do more about it.”

His comments come as data from Lipper, compiled by retired IFA Bruce Dalton, shows the funds in the Global Equity Income and UK Equity Income sectors that have delivered the highest and most consistent returns over the past three years.

Premier Global Utilities Income is the top yielding global equity income fund, returning £177 over three years on a £1,000 investment. The Schroder Income Maximiser comes top of the UK Equity Income sector over the same period, delivering £264 of income on £1,000 investment.

IA director of public policy Jonathan Lipkin says the new SORP requirements mean fund distribution per unit must be available on annual reports and accounts, while forthcoming cost and disclosure tables in the new SORP will also help provide clarity.

Yield levels are available on the IA’s website, meaning advisers can compare funds, he says.

Lipkin says: “The association has also carried out significant work to make income disclosure more consistent and comprehensive, including the publication in 2012 of guidance to our membership.

“As savers increasingly rely on the investment industry  to provide them with income in later life, the IA will continue to work with the industry to facilitate meaningful and transparent disclosure.”

However, McDermott questions how much investors really want income rather than capital gains.

He says: “From real-life experience, people who say they care about income over capital probably don’t entirely mean it. They do want income and they want to know which funds consistently pay high yield, but that doesn’t mean they want it at the expense of their capital.”

FE fund analyst Charles Younes says rather than just looking at a straight income figure, advisers should assess the source of income returns and their consistency.

He says: “We want to make sure it’s not just one year of being great, we want to see compounding in dividend payments and dividend growth as well.”


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