Cholwill upstages UK Equity Income stars
The RLAM manager has delivered more consistent medium-term performance than the likes of Neil Woodford, Francis Brooke and John McClure.
By Jenna Voigt , Features Editor, FE Trustnet
Monday September 10, 2012
£290m Royal London UK Equity Income fund is the only fund to have outperformed the UK Equity Income sector average in each of the last six calendar years, according to FE data.
While a number of top-rated UK Equity Income managers tend to outperform in down markets but fall short when they rally – such as Neil Woodford
– and others shoot the lights out in up markets but struggle during down periods – such as John McClure
– Cholwill (pictured)
has managed to beat his rivals across various market conditions.
UK Equity Income
portfolio has a yield of 4.29 per cent, on par with that of the FTSE All Share index. According to FE Analytics
, the average yield for the sector is 4.49 per cent.
It has outperformed its sector in each of the past six calendar years by at least 1 per cent, with the exception of 2008 when it still beat the average fund but lost 28.18 per cent.
Year-on-year performance of fund vs sector
Source: FE Analytics
||2012 returns (%)
||2011 returns (%)
||2010 returns (%)
||2009 returns (%)
||2008 returns (%)
||2007 returns (%)
||2006 returns (%)
|IMA UK Equity Income
|Royal London UK Equity Income
By comparison, Invesco Perpetual Income
sustained a loss of 19.94 per cent in 2008, while McClure’s Unicorn UK Income
fund, which typically outperforms in rising markets, shed 32.76 per cent.
Royal London UK Equity Income then significantly outperformed the sector in 2009 and 2010 as markets bounced back from the financial crisis, but Woodford fell well short.
Year to date, the RLAM fund has delivered 14.89 per cent, while the Invesco fund has lagged the sector average of 10.3 per cent, bringing in 7.01 per cent.
As markets have relaxed in recent months following more decisive action from central banks, particularly the European Central Bank's (ECB) bond-buying programme announced last week, the Unicorn UK Income fund has outperformed over the short-term, returning 19.32 per cent year to date.
Darius McDermott, managing director of Chelsea Financial Services, rates Cholwill’s fund highly and says performance has been steady during the manager's tenure.
"Martin has done a really good job for RLAM and the fund is certainly on our reserve list," he commented.
"It is first quartile over one, three and five years. Martin has done a tidy job. The Equity Income fund is one we could well look at if we need to move something onto our buy-list."
Performance of fund vs sector over 5-yrs
Source: FE Analytics
Woodford’s Invesco Perptual Income fund currently has £9.3bn in assets under management (AUM), making it significantly less flexible than Cholwill’s, as well as Unicorn’s £50.4m fund, which has more of a small cap focus.
While Cholwill has a high weighting to blue-chip stocks in his portfolio – AstraZeneca, GlaxoSmithKline and BP are all top-10 holdings – he has used this flexibility to invest further down the market cap spectrum.
Smaller FTSE 100 companies Severn Trent, Pennon Group and Hargreaves Lansdown are among his biggest positions.
With a minimum investment of £1,000 and a minimum top-up of £100, Royal London UK Equity Income is tailored for retail investors.
It has a total expense ratio (TER) of 1.32 per cent, making it among the cheapest in the entire UK Equity Income sector.