St James’s Place Equity Income kicked out of IMA sector

The £1.2bn St James’s Place Equity Income trust, managed by RWC’s Nick Purves, has been kicked out of the IMA UK Equity Income sector for failing to meet the minimum yield target.

Investment Week revealed in December the fund was one of several whose yield had fallen below the IMA's minimum yield threshold, putting their place in the sector in jeopardy.

Funds must achieve the IMA's basic yield target of 110% of the FTSE All Share yield over a three-year rolling period to remain in the UK Equity Income sector.

They must also run an income level of at least 90% of the FTSE All Share yield, on an annual basis.

Purves' St James's Place equity income trust undershot the basic yield target in 2010-2011, yielding 3.1% at its year end, while the FTSE All Share delivered 3.5%.

In 2011-2012 and 2012-2013 the fund matched the FTSE All Share, but was unable to claw back its 2010-2011 underperformance.

Andrew Humphries, executive director for asset management at St James's Place, said the group was unwilling to change the fund's investment process in order to meet the minimum yield target and remain in the sector.

"We are comfortable exiting the sector to preserve the manager's investment approach, as our primary concern is long-term performance," he said.

The £343m Henderson UK Equity Income fund, run by James Henderson, is another well-known fund which is under threat, having not met the basic three-year yield requirement over the last two years, according to IMA figures.

Other portfolios that have so far undershot the target are the £277m JPM UK Higher Income and £132m JPM UK Strategic Equity Income funds, the £2.8bn HBOS UK Equity Income fund, and the £10m CF JM Finn UK fund.

"To ensure compliance with the intended 110% yield, funds in the sector will be tested over three-year rolling periods by taking a simple average of the yield figure achieved for each fund at its year end," said a spokesperson for the IMA.

"As an illustration, this would require a fund that delivered 90% in the first year and 100% in the second year to deliver a yield of 140% in the third year, if it were to be allowed to remain in the sector."