Ashby, head of UK equities at Ignis and manager of the Ignis UK Enhanced Income fund, says returns from the UK equity market have outpaced those of its counterparts in other parts of the globe.
"It has become increasingly fashionable to moan about the return recently achieved from investing in the UK equity market, with the FTSE 100 index still approximately 7 per cent below its 2007 peak," Ashby said.
"However, take into account the reinvestment of dividends and a very different picture emerges."
He points out that last year the FTSE All Share beat the S&P 500, which has consistently been the case over the past decade.
Over 10 years, the UK index is up 171.87 per cent, while the US one made 89.12 per cent, according to FE Analytics.
Performance of indices over 10yrs
Source: FE Analytics
The FTSE All Share managed a total return of 12.6 per cent in 2012, despite macro-economic headwinds from Europe.
"This outperformance of UK equities might seem strange given the recent differential in economic growth, but is partly a reflection of the increasingly international nature of the UK equity market," Ashby said.
"For example, the average FTSE 100 constituent now achieves 24 per cent of its revenues in emerging markets and another 24 per cent in the Americas, compared with just 19 per cent in the UK."
Ashby points out that fixed income assets have paid out far higher yields over the past 10 and 20 years than they have done over the past 50.
However, he says equities have paid out a far higher amount still.
"Citigroup calculates that the UK offers the highest dividends of any major equity market, with close to 85 per cent of FTSE 100 companies now offering yields in excess of gilts."
"Combined with the strongest balance sheets in over a decade, this should be attractive for income-seeking investors over the longer-term."
The manager expects three stocks in particular to do well on the back of the current equity rally.
- BSkyB
"The overhang of the Leveson Inquiry and short-term concerns surrounding the need to pay up for sports rights have created an interesting opportunity to build a significant holding in the shares at attractive prices," Ashby said.
"Sky now has over 10 million subscribers and an enviable track record of good customer service and marketing compared with its peers, giving it considerable power to increase revenues from its loyal customers."
"The group also has a very strong balance sheet and investors should expect continued strong dividend growth," he added.
- WH Smith
"The recent announcement of the departure of chief executive officer Kate Swann after 10 years of significant value creation for shareholders is a disappointment, but the strategy remains unchanged – to use the improved margins and cash generation of its mature high street stores to fund the expansion of WH Smith’s presence at airports, railway stations and hospitals and to return excess cash to shareholders via dividends."
- Diploma
"Diploma’s focus on specialised areas has allowed it to consistently achieve high gross margins."
"In addition, a continued focus on keeping operational costs low (primarily through investment in technology) has resulted in a steady improvement in operating margins to over 20 per cent.
The company is highly cash-generative with a strong balance sheet and shareholders should expect significant growth in dividends over the next few years."
The fund has returned 137.53 per cent over 10 years, while the the IMA UK Equity Income sector has made 152.29 per cent.
The FTSE All Share picked up 171.87 per cent over the period.
Performance of fund vs sector and index over 10 yrs
Source: FE Analytics
The fund requires a minimum investment of £500 and carries a total expense ratio (TER) of 1.7 per cent.