Investment Association calls for consumer views on the future of the UK Equity Income sector
The Investment Association has today signalled the importance of considering savers' needs by announcing consumer research to help decide the future of the UK Equity Income sector.
The research, which will be conducted by YouGov and include both consumers and Independent Financial Advisers (IFAs), comes after the Association invited its members to assess whether the current sector requirements are fit for purpose and put forward two options for change in April this year.
Industry feedback has shown that there continues to be a wide range of views on how the sector should be defined. There was a near fifty-fifty split between those who wanted to remain with the status quo, and those who believed that change was needed.
The consumer research will now ask investors and their advisers how they identify UK equity income funds and whether the current definition of the sector is helpful in supporting their objectives.
The results of the research will help the Sectors Committee to decide between the following three options:
- Option 1 - No change to the sector definition
- Option 2 - replace the current 110% hurdle with a requirement to generate a yield higher than the FTSE All Share over 3 year rolling periods. Retain the 90% yield requirement over 1 year. Demonstrate that an above market average income is an objective of the fund in product or client documents. Other sector criteria unchanged.
- Option 3 - require specific disclosure in relation to income (e.g. net yield, absolute net income generated over 5 years for £100 investment, income growth, total returns, volatility, whether the fund is structured to optimise dividend distribution (i.e. charge fees to capital and not income)). Accordingly, the yield hurdles in the current definition would be removed.
The consumer research will be completed in September, after which the Committee will evaluate all views with the intention of making a final decision on the sector's definition by the end of 2016.
Galina Dimitrova, Director of Capital Markets, said:
"The fundamental role of our sectors is to help investors and their advisers better understand the wide range of products that the asset management industry has to offer.
"Following extensive consultation with our membership, we felt that it was essential to engage with consumers before making any decision about the future of the sector.
"Alongside the consumer research, we encourage all users of the sectors to share their views with the Investment Association in the coming weeks."
To share your opinion on the UK Equity Income sector definition, please email sectors@theia.org by 31 August 2016.
