Defaqto says it identified a need for comprehensive and whole of market research into income funds incorporating both an assessment of performance and other key income-related attributes. Income funds are often a mainstay of client portfolios and widely used.
The ratings have been designed to give advisers a framework around which they can both position and recommend income funds.
The analysis includes rating all income funds that promote themselves as ‘income’ and not just those that sit within the Investment Association (IA) income sectors but also those that have moved to ‘unclassified’ and other sectors.
The analysis by Defaqto also rates historic performance using risk adjusted total return, delivered income yield and income volatility. It also considered forward looking indicators of OCF, fund size and manager tenure when determining the rating.
Of the 10,000 plus funds or fund families that Defaqto analyses, income funds comprise almost 600 funds. They are split into 176 equity, 285 fixed income and 136 multi-asset funds respectively. The number of income funds analysed is continuing to grow as more income funds are coming on stream, says Defaqto.
The funds range from one with only £116,215 in funds under management to the largest of £15.1bn FUM.
Each income fund is rated on a scale of 1 to 5 which is the Diamond Rating. For funds and fund families a Diamond Rating marks the performance and comprehensiveness of the fund in key areas such as cost, scale, accessibility and manager longevity.
The ratings are available to view and use within Defaqto’s investment planning software solution for advisers, Engage.
Engage allows advisers to profile their clients, undertake research and create recommendation reports.
Jason Baran, insight analyst for Investments at Defaqto, said: “Our Income Diamond Ratings have been derived as a result of a 360° view that combines the factors that are most important to clients investing for income, historical information about the income funds and forward looking analysis as well as only focusing on all funds that market themselves as ‘income’, and not just those in the Investment Association income sector.”