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Do equity income funds do more harm than good?

Are dividends really the UK’s 'farcical' signature dish? Algy Hall and fund manager Simon Young argue the case
Do equity income funds do more harm than good?
  • Do equity income funds pervert capital allocation decisions?
  • Or is good capital allocation in the interests of equity income funds as much as anyone else?

A strong dividend record can be the marker of a really great company. It can point to a business that is conservatively run, cash-generative, growing and well-financed. In particular, dividends can be a sign that management avoids taking big risks with shareholders’ money. 

However, a potentially darker side of dividends has recently been getting increased attention. The perceived problem is associated with the powerful presence of equity income funds in the UK market. A type of fund described recently by Marshall Wace founder Paul Marshall in the Financial Times, as “the UK fund management sector’s [peculiar and farcical] signature dish”. 

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