Neptune attacks fund switch by IMA

Neptune has attacked the Investment Management Association (IMA) for shunting its Income fund into the new UK Equity Income & Growth sector. The group says the fund was moved without its knowledge despite its attempts to work with the association.

In recent weeks the IMA named 17 funds that were moved to the new sector after they failed to meet the yield target of the UK Equity Income sector – 110% of the FTSE All-Share. But there are complaints that the IMA did not work closely enough with members and that the timing of the new sector could not be less appropriate when there are likely to be record cuts in dividends in 2009.

In a note to clients, Patrick Berton, sales director at Neptune, says the moving of the Neptune Income fund to the new sector came as a surprise. “We were very disappointed to receive this information along with the rest of the industry via the circular, despite requesting feedback and updates from the IMA in order to engender some kind of collaborative approach,” he writes.

He describes the splitting of the sector in the present environment and the decision to use historical yields as a “grave mistake”.

“It is our belief that Neptune adopts a responsible approach to income fund management and, to all intents and purposes, to be penalised by the IMA is, by ­contrast, wholly irresponsible in our view,” says Berton.

Aidan Kear­ney, co-manager of the Credit Suisse Multi-Manager UK Income Portfolio, says he provided the IMA with the information it reques­ted about his fund. He also made the point that funds of funds are restric­ted by the payout ratio of their underlying holdings. He says the next communication he received was the new sector table, with the Credit Suisse fund included.

“We are not going to re-jig the fund for such a short-term issue. We already have a UK growth sector in the form of the UK All Companies sector. If you are not a fund focused on income and have not hit the 110% yield target, why are you not in this sector? It is nothing to do with performance figures, it just makes sense.”

Kearney adds that although his firm initially worked with the IMA it did not get as far as holding a conversation about moving the fund to the UK All Companies sector before receiving the new sector list.

The IMA says it will review the sectors in 12 months’ time and is happy that the allocation of the funds to the sectors is correct.