Investors are turning away from growth-oriented income funds according to research by Threadneedle I...
Investors are turning away from growth-oriented income funds according to research by Threadneedle Investments.
Six hundred investors were interviewed, and 54% agreed strongly with the statement: "The biggest challenge facing investors today is how to generate a decent income". When asked about their income objective for their investments, those surveyed were required to give their preferred mix of income and capital growth. The research showed investors were more likely to choose a high yield income fund with little prospect for growth rather than a low yield fund which had excellent growth potential.
This points to a sharp divide between growth investors and income seekers. This gap was traditionally bridged by equity income funds which were once one of the most popular fund choices, according to Threadneedle. Threadneedle's research has been backed up by Autif sales figures which confirm the move to higher yield funds on the one hand and growth vehicles on the other. In 1999 total industry sales rose from £39.2bn to £43.6bn, but sales of UK Equity Income Funds fell from £2.6bn in 1998 to £2.4bn. At the same time, sales of UK General Bonds rose from £3.7bn to £6.2bn, according to Autif.
The current yields offered by income funds may now be so low as to be of increasingly residual interest to investors, according to Threadneedle.
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