What level of yield should an equity income fund be forced to pay?

The rules for fund inclusion in the Investment Association’s (IA) UK equity income sector are the most stringent of all categories: funds are required to produce a yield at least 10% higher than the UK stock market.

A significant number of funds have recently fallen foul of this mandate and have been excluded from the sector, prompting a review of the rules.

We wanted to see how FundCalibre visitors felt about the subject and our poll in August asked what they would prefer. More than 50%* of respondents prioritised simple transparency over the level of income produced. As long as they understood the aim of the fund and could make their own decisions, they didn’t think a specific yield target was necessary. 35%* believed an equity income fund should be achieve a higher yield than the market, whilst the remaining 14%* agreed with the IA’s current requirement of a yield at least 10% more.

*Results based on feedback from 73 FundCalibre visitors from 01/08/16 – 31/08/16

The views of the author and any people interviewed are their own and do not constitute financial advice. However the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions. Before you make any investment decision make sure you’re comfortable and fully understand the risks. If you invest in fund or trust make sure you know what specific risks they’re exposed to. Past performance is not a reliable guide to future returns. Remember all investments can fall in value as well as rise, so you could make a loss.