The Analyst: This Standard profits from change
Saturday 25 April 2009
Equity income funds have traditionally been among the most popular areas for UK investors. The best known managers such as Neil Woodford at Invesco Perpetual and Adrian Frost at Artemis tend to hog all the press coverage (indeed I've mentioned them both before in this column). One good fund that often goes overlooked is the Standard Life UK Equity High Income Fund which is run by Karen Robertson.
The fund looks to me solidly placed for 2009. The investment approach is similar to Standard Life's other funds, except of course that Ms Robertson has a yield requirement. She therefore uses their in-house stock ranking tool which looks at 10 factors that influence share price performance. Unfortunately that system didn't work well last year mainly because, like most statistical models, it doesn't work too well when things are changing quickly.
Much of Standard Life's investment effort looks at what they call "focus on change", which basically looks for movement in company expectations. The size of their operation also enables them direct contact with the UK's biggest companies, which can often lead to superior information flow.
The search for income is becoming ever-more important, indeed now that the banks have scrapped their dividends there are fewer stocks out there to choose from. Karen Robertson has a degree of flexibility in this fund because she can actually invest around 20 per cent of the portfolio in lower-yielding stocks. That said the present portfolio yield is 5.4 per cent and she managed to increase it by about 5 per cent to February 2009. She believes for next year she will at least be able to maintain this yield, which would be great news for savers who have seen the return on their cash slashed recently.
I was particularly interested to see one of her top overweight positions in the portfolio. When I say overweight I mean in comparison to its position in the index. She has 1.9 per cent of the fund in Provident Financial (which yields 7.5 per cent).
This is a company which mainly loans money to the poorest people in society. The company itself is well funded and their customers, because they typically have no mortgages and live off benefits, haven't actually seen much of a deterioration in their finances due to the credit crunch.
Tullow Oil is an example of a low-yielding share that Ms Robertson holds in the portfolio because it has a great management team and the company has made some tremendous oil finds over the last few years. Another overweight position is W H Smith, a company a few years ago which was almost completely written off partly because it was trying to do a bit of everything. However, over the course of 2008 it grew its dividend by 15 per cent and its reliance on relatively inexpensive items is a plus in this environment.
The demise of some high-street retail chains has given their surviving competitors a real chance to prosper. HMV is a prime example, which is in the perfect position to pick up additional customers following the death of Woolworths and Zavvi (formerly Virgin Megastores).
Like many other fund managers in the sector, Karen Robertson has significant investment in the tobacco sector, which of late has not done quite so well. However, given the difficult economic background, tobacco firms offer relatively stable earnings and a good yield most importantly it is an income that can grow.
I think it is impossible to reliably call the bottom of the stock market (although if you really want to know, my own view is that we probably haven't reached it yet). Nevertheless, in my opinion equity income investments are a great way to invest for the long term and this fund has an excellent mix of shares. Just as importantly it has a yield which is at least four times more than you can earn on most cash accounts (albeit without the capital guarantees). I remain of the view that equity income funds should be a core part of most investors' portfolios.
Mark Dampier is the head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more information 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
- 1 Michael Brown shooting: Police shoot and kill second young black man near Ferguson
- 2 James Foley 'beheaded': Isis video shows militant with British accent 'execute US journalist' – and warns Obama of more to come
- 3 ALS ice bucket challenge co-founder Corey Griffin drowns aged 27
- 4 Cilla Black defends Cliff Richard: 'I am positive that the allegations are without foundation'
- 5 James Foley 'beheading': Met police warn public watching murder video could be criminal offence
Scottish independence: English people overwhelmingly want Scotland to stay in the UK
Isis threat: Cameron wants an alliance with Iran
Crisis? What crisis? A visiting US doctor gives the NHS a rave review
Russell Brand calls for Israel boycott: Comedian urges big businesses that 'facilitate the oppression of people in Gaza' to pull funding
Ukip MEP calls for reintroduction of death penalty on fiftieth anniversary of last deaths
Michael Brown shooting: Chaos erupts on the streets of Ferguson after autopsy shows teenager was shot six times – twice in the head
iJobs Money & Business
£450 - £600 per day: Harrington Starr: AIFMD Business Analyst / Consultant - I...
£450 - £600 per day: Harrington Starr: Business Analyst Solvency II SME (Pilla...
£350 - £365 per day: Orgtel: Manager, SAS, Data Warehouse, Banking, Bristol - ...
£500 per day: Harrington Starr: SQL DBA/Developer SQL, C#, VBA, Linux, SQL Se...
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