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23 Jan, 2008

Published: 12:00 Wednesday 23 January 2008
By: Dylan Lobo, Investment News Editor

F&C fund of funds manager Richard Philbin has urged the Investment Management Association (IMA) to get tough on funds which consistently flout the rules in the Equity Income sector.

His comments come after the IMA redefined the way yield is calculated on Equity Income funds in a bid to improve transparency in the sector.

Under the previous regime the yield calculation was based on a snapshot of the underlying yield of the securities in the portfolio. Through the new guidelines the focus is on the income the fund has distributed over a historical 12-month period.

While welcoming the move, Philbin said it is essential the IMA is not lenient on those funds which continue to break the rules.

He said: 'The IMA has to vigorously challenge the funds that are not meeting the criteria, and show they have teeth in my opinion,' Philbin said. 'We need to have clear delineation between Equity Income and UK All Company funds.

'I'm glad they are suggesting all funds fall in line with how the calculations are made, so all are fishing in the same pond so to speak. However, they should threaten a number of funds to be expelled from the sector for blatant disregard of the rules.'

Meanwhile, Newton Investment Management fund manager Tineke Frikkee was in full support of the IMA move and said she had been using the new methodology on her £3.3 billion Newton Higher Income (Newton Higher Income) fund, which has yielded 5.2%, for a considerable time.

'We believe that these changes will provide investors and advisers with a more comparable peer group which consistently delivers above average income to their investors,' she said.

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