Mark Dampier: Trojan grows income without volatility

The Analyst

Predicting where interest rates will be in a year's time is fraught with difficulty. However, I remain steadfast in my view that interest rates will stay lower for longer than most people think. Even the money markets get it wrong. Only a few months ago they appeared to be factoring in three rate hikes during the course of 2011, but this has now changed to a single rise of 0.25 per cent in a year's time.

This will hardly please savers, who continue to see very low rates of return on cash deposits. Unfortunately there is little that can be done about the situation, and some will have no choice but to increasingly eat into capital, or else take on more risk in the hope of generating a better return.

Realising that returns on cash are set to be low for an extended period, many people have been going for the latter option. Corporate bond and equity income funds have both been popular with investors seeking income. However, it is important not to get carried away. It is always wise to keep a reasonable amount of cash, for two reasons. First, everyone needs a rainy day fund for those unexpected events in life; and second, as part of your investment portfolio cash gives you the option of investing more at a future point – perhaps when you have had a chance to mull over an investment, or to top up your holdings during a market setback.

Of course, if you are looking to invest rather than hold cash, you have no choice but to accept a higher degree of risk. Risk is a concept that can easily be misunderstood. It means different things to different people. One person's "high risk" is another's "cautious" depending on (among other things) age, resources and personal objectives. However, the acid test for everyone is the same: if you make the investment, will you be able to sleep at night? If the answer is no, then you have made the wrong investment.

With this in mind, one fund that might appeal to a number of investors is the Trojan Income Fund, run by Troy Asset Management and managed by Francis Brook. Like any stock market investment it carries risk, but interestingly the fund has the lowest volatility in the IMA UK equity income sector since its launch in 2004, as well as an unbroken record of growing income payments. This year looks set to be no different, with Brook expecting a 3 per cent to 4 per cent increase.

Backed by Lord Weinstock, Troy Asset Management was set up in 2000 with the philosophy of wealth preservation at its heart. The Troy way of thinking is that if you minimise losses during market downturns, you don't have to regain as much when they recover, and it is something that both this fund and the multi-asset Troy Trojan Fund (which I have highlighted previously) have demonstrated extremely well over recent years.

The Trojan Income Fund currently yields 4.3 per cent, and tends to be invested in well-known blue-chip companies such as GlaxoSmithKline, Vodafone, Centrica and Tesco. Among the holdings there are some overseas companies too, with Nestlé presently the largest. This is all fairly typical of funds in the equity income sector, but what is more unusual is the manager's active use of cash. The fund currently has 9 per cent here, a significant position, and Brook has had larger amounts when he felt it appropriate. Interestingly, he is somewhat cautious of stock markets at the moment, believing that the debt crisis in the West will cause problems later on, providing a good buying opportunity.

The decision to move heavily into cash is not an easy one for a fund manager. If he is wrong, he can be left behind with the market rising. However, Trojan's track record here is actually very good, so for investors wanting an equity fund that aims to take some risk off the table at appropriate times it is certainly one to consider.

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

Life and Style
“What is it like being a girl?” was the question on the lips of one inquisitive Reddit user this week
News
peopleDave Legeno, the actor who played werewolf Fenrir Greyback in the Harry Potter films, has died
Arts and Entertainment
Armando Iannucci, the creator of 'The Thick of It' says he has
tvArmando Iannucci to concentrate on US show Veep
Life and Style
beauty
PROMOTED VIDEO
Sport
Luis Suarez looks towards the crowd during the 2-1 victory over England
transfers
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

Sport
German supporters (left) and Argentina fans
world cup 2014Final gives England fans a choice between to old enemies
Arts and Entertainment
A still from the worldwide Dawn of the Planet of the Apes trailer debut
film
News
peopleMario Balotelli poses with 'shotgun' in controversial Instagram pic
News
A mugshot of Ian Watkins released by South Wales Police following his guilty pleas
peopleBandmates open up about abuse
Sport
Basketball superstar LeBron James gets into his stride for the Cleveland Cavaliers
sportNBA superstar announces decision to return to Cleveland Cavaliers
Sport
Javier Mascherano of Argentina tackles Arjen Robben of the Netherlands as he attempts a shot
world cup 2014
Arts and Entertainment
The successful ITV drama Broadchurch starring David Tenant and Olivia Coleman came to an end tonight
tv
Sport
Four ski officials in Slovenia have been suspended following allegations of results rigging
sportFour Slovenian officials suspended after allegations they helped violinist get slalom place
News
14 March 2011: George Clooney testifies before the Senate Foreign Relations Committee during a hearing titled 'Sudan and South Sudan: Independence and Insecurity.' Clooney is co-founder of the Satellite Sentinel Project which uses private satellites to collect evidence of crimes against civilian populations in Sudan
people
Arts and Entertainment
Balaban is indirectly responsible for the existence of Downton Abbey, having first discovered Julian Fellowes' talents as a screenwriter
tvCast members told to lose weight after snacking on set
Life and Style
More than half of young adults have engaged in 'unwanted but consensual sexting with a committed partner,' according to research
tech
Life and Style
A binge is classed as four or more alcoholic drinks for women and five or more for men, consumed over a roughly two-hour period
tech
Finacial products from our partners
Property search
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

    BC2

    £50000 - £70000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

    Programme Support, Coms, Bristol, £300-350p/d

    £300 - £350 per day + competitive: Orgtel: My client, a leading bank, is curre...

    (Junior) IT Systems Administrator / Infrastructure Analyst

    £28000 - £32000 per annum + pension, 25 days holiday: Ashdown Group: A highly ...

    Finance Officer

    Negotiable: Randstad Education Birmingham: Randstad Education are seeking a Fi...

    Day In a Page

    A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

    A History of the First World War in 100 Moments

    Peace without magnanimity - the summit in a railway siding that ended the fighting
    Scottish independence: How the Commonwealth Games could swing the vote

    Scottish independence: How the Commonwealth Games could swing the vote

    In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
    Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

    A writer spends a night on the streets

    Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
    Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

    UK's railways are entering a new golden age

    New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
    Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

    Conchita becomes a 'bride' on Paris catwalk

    Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
    Pétanque World Championship in Marseilles hit by

    Pétanque 'world cup' hit by death threats

    This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
    Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

    Why did we stop eating whelks?

    Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
    10 best women's sunglasses

    In the shade: 10 best women's sunglasses

    From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
    Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

    World Cup final: Messi? Mascherano is key for Argentina...

    No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
    Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

    Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

    18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
    The true Gaza back-story that the Israelis aren’t telling this week

    The true Gaza back-story that the Israelis aren’t telling this week

    A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
    A History of the First World War in 100 Moments: The German people demand an end to the fighting

    A History of the First World War in 100 Moments

    The German people demand an end to the fighting
    New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

    New play reveals what Oscar Wilde said at trials

    For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
    Can scientists save the world's sea life from

    Can scientists save our sea life?

    By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
    Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

    Richard III review

    Martin Freeman’s psychotic monarch is big on mockery but wanting in malice