Following the ‘pension freedom’ reforms announced in 2014 and implemented in 2015/16, income funds have been gaining in prominence.
The aim of these funds is to offer investors a natural income by investing in suitable securities, funds and sectors - for example companies paying high dividends in the case of equity income funds plus high yield bonds, property and infrastructure in the case of multi-asset income funds.
In order to make comparisons more ‘like-for-like’, we rate income funds in three different sectors:
The Diamond Rating process assesses funds in each sector using the following measures:
- Conditional Sharpe ratio, Calmar ratio and capital batting average
- Income volatility
We also consider a range of other criteria, including:
- Fund manager longevity
- Fund costs
- Number of distribution partners
- Group and fund assets under management