Franklin Templeton's Morton: IA rule changes make UK equity income funds 'less explainable' to clients

Sector rules changed in March

Colin Morton, lead manager of Franklin Templeton's £400m UK Equity Income fund, has criticised the Investment Association's (IA) recent benchmarking changes to the sector, arguing it could give managers too much flexibility and makes the sector "less explainable" to clients.

The IA recently adjusted the UK Equity Income sector rulings following a consultation with members, reducing the 110% of the FTSE All-Share index yield hurdle to just 100% over a three-year rolling period. "[The new rules] have significantly shifted the goal posts in the UK Equity Income space," said Morton. "You can now qualify to be an income fund if you just yield the same as the market. "It does not seem unreasonable to me that if you call something the ‘UK Equity Income sector' those within it should be yielding more than the market average. It has made equity income less explain...