Calls grow from European equity income sector

The IMA last week created a global equity income sector, but it faces continued calls for a grouping solely for Europe-focused funds.

Oliver Russ
Oliver Russ

The IMA Global Equity Income sector will open on January 1 to funds that hold at least 80% of their assets in global equities and have a distributable income above 110% of the MSCI World Index yield at their year end.

The trade body says it is “exploring the possibility” of a European equity income sector but that there are not enough products to populate the space. It will review the prospects for creating such a sector when the number of potentially eligible funds rises to 10 or more, which the IMA regards as the minimum necessary for establishing a separate group.

Oliver Russ, the manager of the £353.5m Ignis Argonaut European Income fund, reckons there are already “about a dozen” funds that could qualify for a European equity income label.

These funds would benefit from being differentiated from non-income companions in their current IMA Europe ex UK sector, he says. “When people think equity income they think UK first of all, then they may think global. But there’s a lot outside of those two pots and Europe is the most natural home of income in the world.” (Continues below)

Creating a European equity income sector would allow for a fairer comparison of the funds than they receive from being in the wider sector, Russ adds.

“It’s like comparing UK All Companies to UK Income – it’s just not quite the same thing. There will be times when we look really good and times when we look bad against the rest, but that’s because we have fundamentally different objectives.”

The IMA will also harmonise its managed sectors with their Association of British Insurers (ABI) equivalents at the start of next year, to improve clarity, consistency and comparability.

The IMA Cautious Managed and Balance Managed peer groups will become Mixed Investment 20-60% Shares and Mixed Investment 40-85% Shares, sharing the names of their respective ABI equivalents.

IMA Active Managed and the ABI Mixed Investment 60-100% Shares will be labelled Flexible Investment, while the ABI Mixed Investment 0-35% Shares sector, which has no IMA equivalent, will remain.

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