Equity income funds - growing attractions
Brian Dennehy
Some of the gloomy headlines over the holiday season would have you believe it was a bad decade for investors. This snapshot of the popular equity income sector highlights how the positive story unfolded through 2009 (and glances back over the decade too).
CLICK HERE to link through to a table of the whole sector sorted on their total return (capital growth plus reinvested income) over 2009.
The first three funds are very small and/or idiosyncratic, and then come the larger funds, JOHCM UK Equity Income in top place, followed by BlackRock UK Income, and Schroder Income – these three funds up are 40.36%, 37.96% and 35.87% respectively (the sector average was just 23%).
All three were also at least respectable in term of the dividend payout - BlacRock was unchanged, Schroder down 4%, and JOHCM down 13%, all providing a better outcome than for the market as a whole.
Do use the total return table intelligently. A snapshot of performance over one year is a bit of a blunt instrument if used in isolation. Which is why in the total return table we also show the how the performance has progressed over 6, 3, and 1 month periods.
In this way you can see clearly how the year unfolded – Newton Higher Income over the year is 4th quartile (the big high yielding multinationals where the fund is commiteed were overlooked overlooked earlier in the year), yet over the two most recent periods it is 2nd and 1st quartile. We believe that the latter could reflect an unfolding trend in 2010, as attention shifts to the global companies with high yields.
Now let's use that table to glance back over the decade. The BlackRock and Schroder funds are also top quartile over 10 years, and consider the margin by which they have outperformed the growth-orientated UK All Company sector and the FTSE All Share - even the average UK equity income fund has outperformed the latter two benchmarks.
Don't underestimate the power of dividends in driving performance - it is what all the long term studies tell us should happen, using data back to the 19th century, and it was no different over the last decade - which was a bit wobbly, but far from disastrous.
Date: 07.01.2010