Income Funds

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:

  • Equity
  • Bond
  • Multi-Asset

The Diamond Rating process assesses funds in each sector using the following measures:

  • Yield
  • 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

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