Mark Dampier: Slater’s investment mix gives balance


At the time of writing, the UK stock market, as measured by the FTSE All Share Index, has fallen around  7 per cent from the high it reached just a few weeks ago.

Given the extraordinary burst of performance seen over the past few months many investors were probably looking for an excuse to take some profits. Such a correction was therefore not a surprise and while some commentators have tried to herald the falls as the start of a new bear market, I think that this is  an overreaction.  

Investors need to consider that while bond yields have risen (and prices have fallen) they are still only at the level seen last Christmas. I do not see UK interest rates rising before the next general election, so while I am not an outright fan of bonds nor do I see their demise as imminent. What recent market movements do show though is how equities and bonds are interlinked. As bond yields have risen, equity markets have fallen.

In this environment I continue to believe a selection of high-quality, equity income funds can form the cornerstone of almost any portfolio. Providing investors are willing to take some risk with their capital the yields on offer are attractive, and there is the potential for income and capital growth over the long term.

A relatively new fund that recently caught my eye was Mark Slater’s MFM Slater Income Fund which launched in September 2011. It has an historic yield of 3.9 per cent while Mr Slater believes the prospective yield is 4.7 per cent.

Income investing is an interesting departure from the norm for Mr Slater, who also manages the growth-focused MFM Slater Growth and MFM Slater Recovery funds. On this fund he employs a strong income focus. He wants all the companies in which he invests to make a meaningful contribution to the fund’s yield.

Broadly speaking, he separates companies into three buckets. First there are growth stocks that also have a good yield. In this category he cites Cineworld, which has a 4.5 per cent yield, but also strong earnings growth of around 12 per cent a year. He has been impressed by the company’s use of the internet in getting to know its customers and spurring stronger growth than competitors. 

Secondly, he highlights companies that are not growing their earnings rapidly, but where he sees material upside in a stronger economy. This category includes companies that might have experienced short-term difficulties, but where they have stabilised and are on the path to resolving them. BAE systems, for example, has seen earnings stagnate due to defence cutbacks, but Mr Slater believes with a yield of 5.3 per cent he is being paid to wait for the upside.

Finally, there are “dividend stalwarts” which offer slower, but reliable earnings growth with sustainable dividends. Examples in this category include GlaxoSmithKline and KCOM, the old Kingston Communications, where dividends are growing strongly.

Mr Slater believes holding a mix of companies in the above categories creates a balanced portfolio. He is agnostic as to company size and presently has around 28 per cent invested in FTSE 100 companies, a further 33 per cent in mid-sized firms in the FTSE 250 Index, and the remainder in smaller businesses. He tends to hold between 60 and  70 companies in the portfolio, but more importantly he is currently seeing plenty of opportunities.

Like any good fund manager,  Mr Slater finds deciding when to sell his biggest challenge. When something goes wrong the decision tends to be easier. He sold Chemring after the company cut its dividend. With growth stocks that continue to perform well the decision is harder as the reward of share-price growth has to be set against a falling yield. He held Restaurant Group, for example, as the yield went from 4 per cent to 2.5 per cent on the back of strong share-price growth.

Mr Slater’s other two funds are near the bottom of the tables right now, but this is often the time they are worth taking a closer look at.

Funds go out of fashion at times, but managers who maintain a disciplined approach often bounce back.

In the past when Mr Slater’s funds have bounced back they have done so strongly.

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

Have you tried new the Independent Digital Edition apps?
Arts and Entertainment
On set of the Secret Cinema's Back to the Future event
filmBut why were Back to the Future screenings cancelled?
Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Lewis Hamilton walks back to the pit lane with his Mercedes burning in the background
Formula 1
Arts and Entertainment
The new characters were announced yesterday at San Diego Comic Con
comic-con 2014
Arsenal supporters gather for a recent ‘fan party’ in New Jersey
Arts and Entertainment
No Devotion's Geoff Rickly and Stuart Richardson
musicReview: No Devotion, O2 Academy Islington, London
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Life and Style
Balmain's autumn/winter 2014 campaign, shot by Mario Sorrenti and featuring Binx Walton, Cara Delevingne, Jourdan Dunn, Ysaunny Brito, Issa Lish and Kayla Scott
fashionHow Olivier Rousteing is revitalising the house of Balmain
Finacial products from our partners
Property search




Fee-free, expert mortgage advice:

  • Find the right mortgage for you
  • Latest best-buy deals
  • Mortgage calculators
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Senior Risk Manager - Banking - London - £650

    £600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

    The benefits of being in Recruitment at SThree...

    £18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

    Test Analyst - UAT - Credit Risk

    £280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

    Trainee Recruitment Consultants - Banking & Finance

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

    Day In a Page

    Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

    Best comedians: How the professionals go about their funny business

    For all those wanting to know how stand-ups keep standing, here are some of the best moments
    Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

    Jokes on Hollywood

    With comedy film audiences shrinking, it’s time to move on
    Edinburgh Fringe 2014: The comedy highlights, from Bridget Christie to Jack Dee

    Edinburgh Fringe 2014

    The comedy highlights, from Bridget Christie to Jack Dee
    Evan Davis: The BBC’s wolf in sheep’s clothing to take over at Newsnight

    The BBC’s wolf in sheep’s clothing

    What will Evan Davis be like on Newsnight?
    Finding the names for America’s shame: What happens to the immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert?

    Finding the names for America’s shame

    The immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert
    Inside a church for Born Again Christians: Speaking to God in a Manchester multiplex

    Inside a church for Born Again Christians

    As Britain's Anglican church struggles to establish its modern identity, one branch of Christianity is booming
    Rihanna, Kim Kardashian and me: How Olivier Rousteing is revitalising the house of Balmain

    Olivier Rousteing is revitalising the house of Balmain

    Parisian couturier Pierre Balmain made his name dressing the mid-century jet set. Today, Olivier Rousteing – heir to the house Pierre built – is celebrating their 21st-century equivalents. The result? Nothing short of Balmania
    Cancer, cardiac arrest, HIV and homelessness - and he's only 39

    Incredible survival story of David Tovey

    Tovey went from cooking for the Queen to rifling through bins for his supper. His is a startling story of endurance against the odds – and of a social safety net failing at every turn
    Backhanders, bribery and abuses of power have soared in China as economy surges

    Bribery and abuses of power soar in China

    The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
    Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

    Highland terriers steal the show at opening ceremony

    Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
    German art world rocked as artists use renowned fat sculpture to distil schnapps

    Brewing the fat from artwork angers widow of sculptor

    Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
    BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

    BBC takes viewers back down memory lane

    The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
    Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

    Nicolas Cage shines in low-budget drama Joe

    Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
    How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

    Make your own ice lollies and frozen yoghurt

    Think outside the cool box for this summer's tempting frozen treats
    Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

    Fiesta is UK's most popular car of all-time

    Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride