Santander Asset Management has stopped applying income smoothing to its funds as a result of market volatility.
Investors in the group’s funds usually receive income through a monthly or quarterly distribution, which is ‘smoothed’ so that an equal amount is paid to investors each time.
However, in a letter to shareholders in the Santander Sterling Bond Income Portfolio earlier this year (April 17), Santander said this will no longer be the case.
“Recent market volatility has significantly affected the ability of the authorised corporate director to accurately predict the level of income that will be received by the funds,” the company said.
Due to this, a number of funds have been subject to a number of revised smoothed rates over the past year.
Santander said, after discussions with industry bodies and a review of shareholder experience, it had decided it is in the best interest of shareholders to stop applying income smoothing to funds.
Instead, future payments will be based on income accrued by the share class they are investing in during the payment period, with no income held back by the ACD.
Santander said the change will not affect any of the funds’ income objectives, and that all income earned from the funds will be paid out to shareholders.
The news was first reported by Ignites Europe.
Global markets have seen heightened volatility in the past year after rising inflation has led central banks to hike interest rates at speed.
Retail investors have been spooked as a result, with fund sales saw their worst year on record in 2022 with net redemptions of £26bn, according to figures from the Investment Association.
sally.hickey@ft.com
