Mark Dampier: Trojan grows income without volatility
Saturday 09 July 2011
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
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Jo from Northern Ireland was less than impressed by Russell Brand's attempt to stage a publicity stunt
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
Shock poll shows voters believe Ukip is to the left of the Tories
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
New era of cheap oil 'will destroy green revolution'
Ukip founder Alan Sked and Nigel Farage 'begged Enoch Powell to stand as a candidate'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
iJobs Money & Business
£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...
£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...
$125 - $175 per annum: Carlton Senior Appointments: Senior Wealth Manager In...
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
Day In a Page
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
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