Mark Dampier: Forget forecasts and find good fund managers

The Analyst

I highlighted the Trojan Income fund back in July and I make no apologies for returning to it. Since that date stock markets have been more volatile than I can remember in my 28 years in the investment industry, and the fund has coped admirably. The volatility is driven by macro-economic factors, particularly in the eurozone where politicians are failing to grapple with the current problems and remain a step behind the market. I cannot see this situation lasting much longer. It seems that either the eurozone will break up, at least in part, or that the ECB will come in as the buyer of last resort as has happened with central banks in the UK and US.

With all this going on, trying to forecast the market in any rational way has become harder than ever. In truth, the answer is to not forecast anything at all. Instead, concentrate on having the best fund managers looking after your money and have a decent percentage of your portfolio in cash ready to swoop if events suddenly take a turn for the worse. The trouble is holding cash is fraught with its own difficulties. You pay a high price for security with current rates a long way behind inflation, and as banks are still repairing themselves I do sometimes wonder how safe my cash really is. The first £85,000 in any one institution is guaranteed by the government, but the eurozone crisis is showing us that sovereign debt itself isn't as safe as once thought, turning the notion of risk on its head.

What we do know is that interest rates are not going up any time soon, and rates on cash deposits are likely to remain low. So despite the volatility of the equity market, exposure to good-quality high-yielding shares looks attractive. It is not difficult to envisage many of these top businesses being around and thriving in 10 or 20 years' time. In contrast, looking around the eurozone it is questionable whether some countries will still be part of it.

Trojan Income, managed by Francis Brooke, is full of good-quality, stable companies such as Vodafone, Shell, GlaxoSmithKline, AstraZeneca and Tesco. While these companies can be affected in the short term by macro-economic influences they look strong enough to withstand most problems. As well as larger firms there is exposure to lesser-known companies paying generous dividends such as Greggs, London & Stamford and AG Barr. There are also some robust overseas companies such as Nestlé and Coca Cola. Interestingly, the Trojan managers are positive on the prospects for gold, and the fund contains Newmont Mining and Newcrest Mining, two of the world's leading gold producers.

The fund is part of Troy Asset Management, which was set up in 2000 with a simple "total return" approach in mind. Their philosophy is that if you minimise losses during downturns, you don't have to regain as much when markets recover, so Troy funds all have a capital preservation mentality at their heart. Given its aim of producing a high level of income, this fund tends to stay more fully invested than the Troy Trojan fund, which I have previously written about. Even so, Francis Brooke often lets cash build up to significant levels if he believes valuations will become more attractive – an unusual tactic in this sector. Presently, cash accounts for 7 per cent of the portfolio, though it has been well into double figures at times. This attention to deploying cash at the right moments has helped generate the fund's excellent performance, as well as make it the least volatile in its sector since its launch in 2004.

Trojan Income has just the sort of portfolio that should be relatively resilient in an uncertain economic climate, and with a present yield of more than 4 per cent and an unbroken record of growing income payments since launch it is not a bad place to look for income. Hopefully, further dividend increases lie ahead for 2013. The fund should therefore appeal to a wide range of income-seeking investors, as well as those with a more cautious outlook looking to remain invested in the stock market through good-quality, dividend-paying companies.

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.h-l.co.uk/independent

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

    Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

    £50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

    Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

    £13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

    Ashdown Group: Training Programme Manager - City, London

    £40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

    Day In a Page

    Where the spooks get their coffee fix: The busiest Starbucks in the US is also the most secretive

    The secret CIA Starbucks

    The coffee shop is deep inside the agency's forested Virginia compound
    Revealed: How the Establishment closed ranks over fallout from Loch Ness Monster 'sighting'

    How the Establishment closed ranks over fallout from Nessie 'sighting'

    The Natural History Museum's chief scientist was dismissed for declaring he had found the monster
    One million Britons using food banks, according to Trussell Trust

    One million Britons using food banks

    Huge surge in number of families dependent on emergency food aid
    Excavation at Italian cafe to fix rising damp unearths 2,500 years of history in 3,000 amazing objects

    2,500 years of history in 3,000 amazing objects

    Excavation at Italian cafe to fix rising damp unearths trove
    The Hubble Space Telescope's amazing journey, 25 years on

    The Hubble Space Telescope's amazing journey 25 years on

    The space telescope was seen as a costly flop on its first release
    Did Conservative peer Lord Ashcroft quit the House of Lords to become a non-dom?

    Did Lord Ashcroft quit the House of Lords to become a non-dom?

    A document seen by The Independent shows that a week after he resigned from the Lords he sold 350,000 shares in an American company - netting him $11.2m
    Apple's ethnic emojis are being used to make racist comments on social media

    Ethnic emojis used in racist comments

    They were intended to promote harmony, but have achieved the opposite
    Sir Kenneth Branagh interview: 'My bones are in the theatre'

    Sir Kenneth Branagh: 'My bones are in the theatre'

    The actor-turned-director’s new company will stage five plays from October – including works by Shakespeare and John Osborne
    The sloth is now the face (and furry body) of three big advertising campaigns

    The sloth is the face of three ad campaigns

    Priya Elan discovers why slow and sleepy wins the race for brands in need of a new image
    How to run a restaurant: As two newbies discovered, there's more to it than good food

    How to run a restaurant

    As two newbies discovered, there's more to it than good food
    Record Store Day: Remembering an era when buying and selling discs were labours of love

    Record Store Day: The vinyl countdown

    For Lois Pryce, working in a record shop was a dream job - until the bean counters ruined it
    Usher, Mary J Blige and Will.i.am to give free concert as part of the Global Poverty Project

    Mary J Blige and Will.i.am to give free concert

    The concert in Washington is part of the Global Citizen project, which aims to encourage young people to donate to charity
    10 best tote bags

    Accessorise with a stylish shopper this spring: 10 best tote bags

    We find carriers with room for all your essentials (and a bit more)
    Paul Scholes column: I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England

    Paul Scholes column

    I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England
    Jessica Ennis-Hill: 'I just want to give it my best shot'

    Jessica Ennis-Hill: 'I just want to give it my best shot'

    The heptathlete has gone from the toast of the nation to being a sleep-deprived mum - but she’s ready to compete again. She just doesn't know how well she'll do...