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The rules of the game

Rules are made to be broken. Not so, says Liontrust chief executive Nigel Legge who this week hit out at the Investment Management Association calling on it to be stricter over qualifying criteria for its UK equity income sector.

The IMA stipulates a fund must have 80 per cent invested in UK equities and aim to distribute a yield of 110 per cent of the FTSE All Share in order to qualify.

However, August figures from www.fundfact.com and Trustnet reveal that 87 funds are flouting the yield targets. Legge is lobbying for the removal of the word “aim” on the grounds that it is ambiguous and also says a sector split would ease fund comparisons for advisers and their clients.

Elsewhere, Thames River says it isn’t in the game to qualify, it wants to come top of the league for manager recruitment. Investment director Michael Warren is looking to strengthen the company’s UK team but says he will not consider taking on second-rate players. “We want the Manchester Uniteds and Chelseas of this world who we know can come top of the table and we are prepared to wait for that,” he says.

In global news, Russia’s recent incursion into Georgia has left many in the industry questioning what international opportunities remain for the sage investor. Jupiter and Gartmore are amongst those who have scaled back exposure to Russia as political tensions heightened but other fund managers still highlight the long-term fundamentals of the country.

Chelsea Financial Services head of research Juliet Schooling says Russia still holds sound economic growth principles but recent events are a timely reminder that a risk premium should be in place when dabbling in overseas investment. She says: “Russia’s certainly not for the risk averse but it could offer an interesting growth story in an investor’s portfolio.”

With US credit concerns continuing to drag on the UK economy, the investment path ahead, be it home or abroad looks bumpy.

In other news this week, Alliance Trust’s current CIO Katherine Garrett-Cox has been appointed chief executive, stepping into the shoes of Alan Harden who leaves the Company at the end of August.

M&G also announced that UK Select fund manager Mike Felton is stepping down from his role temporarily due to illness. Felton has been diagnosed with leukaemia and begins medical treatment immediately with fund deputy Garfield Kiff taking up the helm in his absence. Felton is expected back in early 2009.

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