Mark Dampier: Follow the fund manager who invests flexibly across the market
Saturday 16 August 2014
When constructing an income portfolio using UK equity income funds, I believe it's important to select a variety of management styles rather than choosing the funds with the highest yields.
The Standard Life UK Equity Income Unconstrained fund employs a similar approach; it doesn't target a specific level of income, while it invests flexibly across the entire UK market.
A change of manager to Thomas Moore in 2009 seems to have transformed the fund's performance. It is now often near the top of the tables.
Passive fans may put this down to luck, as Mr Moore's tenure began not long before the market rebounded following the financial crisis. While true, I would point out he was brave enough to keep many of the fund's original stocks, believing their share prices had been beaten down too far and were due a re-rating.
Indeed, the UK team at Standard Life stood out from the crowd at this time: their bullish stance developed well in advance of many other fund management groups. It took a strong stomach to hold on to some of the UK's worst-performing stocks, but Mr Moore did so and his views were subsequently vindicated.
Others may suggest the fund's bias towards small and medium-sized companies has been the main performance driver, given their strength over the past five years. This is true to an extent, but I feel credit is also due for the manager's stock-picking. The UK team seeks companies experiencing positive, and as yet unrecognised, change – which will ultimately cause others to buy the stock and drive the price upwards.
Mr Moore doesn't like to be labelled a mere "mid-cap" manager. The unconstrained nature of his fund allows him to invest wherever he sees value and share price momentum. This approach means greater volatility should be expected; the fund has previously undergone short-term, but severe, periods of underperformance, especially when the market has been in "risk-off" mode. More recently he has increased exposure to larger companies in the FTSE 100, such as Rio Tinto, where he envisages strong dividend growth over the next few years. BP is another example. The company has been selling its less profitable assets, reinvesting in those of better quality. It's currently paying an attractive yield of around 5 per cent, although with ongoing political challenges, the company is suffering due to its holding in Russian oil company Rosneft.
In the past, Mr Moore has been critical of many FTSE 100 stocks, in particular pharmaceuticals such as GlaxoSmithKline, where he sees earnings falling and little in the research pipeline. On the other hand, he has been a holder of telecoms group BT for quite some time, where he believes the very opposite characteristics can be found.
He admits to missing out on the rally in AstraZeneca's share price this year, though unlike many other fund managers, he doesn't see much value here. Mr Moore points out that earnings growth across the FTSE 250 looks far better.
Overall, I would say the fund is quite the diversifier. Unlike many of his larger competitors such as Artemis, Woodford IM and Invesco Perpetual, Mr Moore holds no Royal Dutch Shell or Imperial Tobacco, and as mentioned above, no GSK or AstraZeneca. Among his largest holdings are Legal & General and British American Tobacco, with less mainstream businesses such as Britvic, Beazley and Direct Line. This manager is certainly no benchmark hugger.
Interestingly, for those seeking income, and income growth, the fund has seen average dividend growth of 23 per cent over the past year. Given that once interest rates rise, they are likely to do so gradually and peak at a relatively low level, this is surely the type of fund investors should be pursuing, especially for tax-free wrappers such as Isas and Sipps. In my eyes, a portfolio of companies demonstrating both strong dividend and capital growth is an ideal combination.
Mr Moore also runs an equity income investment trust.
Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more details about the funds included in this column, visit www.hl.co.uk
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Scottish independence: Ireland since 1919 is a lesson for Scotland in what a Yes vote means
- 2 Thailand deaths: Pair's bloodied bodies found naked on Koh Tao beach
- 3 Lego breaks out of the toy box and heads for the gallery
- 4 Julian Assange and Edward Snowden join piracy mogul Kim Dotcom’s political campaign in New Zealand
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
£23m Birmingham cycle scheme is attacked by Tory councillor for not catering to the elderly
Salmond accused of laughing off national debt with ‘what are they going to do: invade?’ joke
iJobs Money & Business
£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
£35000 - £38000 per annum + Benefits: Ashdown Group: Training Coordinator / Pl...
Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)
£400 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony