Having previously been considered one of the best fund managers in the business during the 1990s, Bill Mott has had a tough time of late, with his £350m Psigma Income fund down against its sector and benchmark since its launch in October 2007.
However Hambidge, who manages Premier Multi Asset Distribution, says Psigma Income’s emphasis on a steady and growing income would make it an asset to any portfolio of funds.
"He [Bill Mott] is one of the managers who always keeps his income shareholders in mind," Hambidge explained.
Hambidge thinks too much emphasis is placed on an income fund’s performance compared with its peers, as its ability to pay out a steady and growing dividend is the priority for most clients.
"Income investing isn’t just about total return; in fact it is well down the list of requirements," he explained.
"In terms of levels of growth, most investors couldn’t give a monkey’s whether a fund is top quartile or bottom quartile, just as long as that fund is doing its job regarding income."
"When you are effectively in the pack and delivering what you are expected to do – like the Psigma Income fund – then I have no problems holding it."
"The danger in our industry is that you end up selling one of your worst-performing funds and just go and buy yesterday’s best performer. If we had just done that, we wouldn’t have been able to deliver the returns we have been able to," he added.
Hambidge says the Psigma fund’s income potential is the main reason why it will remain in his portfolio. Our data shows that the fund yields 3.91 per cent and Mott has been able to grow his net distribution over the last three years.
Mott finds that yield from a predominantly large cap portfolio, with the likes of GlaxoSmithKline, HSBC and Vodafone all featuring in his top-10 holdings. Hambidge says that exposure is why the fund should be in a diversified portfolio.
Mott’s portfolio has come under criticism recently after struggling against its peers and its benchmark.
According to FE Analytics, since the Psigma Income fund was launched, it has returned 8.28 per cent, while the FTSE All Share and the IMA UK Equity Income sector have returned 31.61 per cent and 25.87 per cent, respectively.
Performance of fund vs sector and index since Oct 2007
Source: FE Analytics
The fund has performed slightly better over the last 18 months and has beaten the index over that time; however, it has still fallen short of its competitors.
The manager says this should not be of concern, because investors must realise that funds will struggle if their style is not in favour.
"We know he hasn’t had the best 18 months, but it hasn’t been that bad either," Hambidge said. "Mid and small caps have driven the market recently so it isn’t the sort of market where he will outperform."
"However, do we want him to start dipping into small caps? No. We already have funds that give us that exposure, like Chelverton UK Equity Income, Aberforth Smaller Companies and the CF Miton UK Multi Cap Income fund," he added.
Hambidge says he had a very similar issue with Kevin Murphy and Nick Kirrage’s Schroder Income fund a couple of years ago, but points out that has had a stellar run in recent months and is now a top performer in the IMA UK Equity Income sector over one and three years.
The manager also says that he would not want all of his funds to be sitting in the top quartile at the same time as it would mean he has his blend wrong.
Hambidge has managed the five crown-rated Premier Multi Asset Distribution fund since its launch in October 1995. It has outperformed the IMA Mixed Investment 20%-60% Shares sector over that time.
Performance of fund vs sector since Oct 1995
Source: FE Analytics
The £216m fund has also beaten the sector average over one, three, five and 10 years.
The fund has a yield of 3.78 per cent and like Mott’s fund, Hambidge has been able to gradually increase his net distribution over recent years.
Due to sector constraints, the fund does have a degree in fixed income. However, the portfolio is predominantly made up of UK equity income funds.
"Our portfolio is quite UK-centric and despite this clamour for overseas equity income funds, the UK is still the most reliable dividend market and therefore we are happy to stay at home," Hambidge said.
However, one possible concern is that the fund could have stock overlaps due to the fact he counts Psigma Income, Rathbone Income, Schroder Income and Franklin UK Equity Income as top-10 holdings.
Nevertheless, the manager says the fund is still diversified and if there were too many individual stock-specific risks then he would address his exposure.
"That is the one valid criticism," he said. "We would argue that all the funds we own are quite different as they invest in different parts of the market and pay out their income at different times."
"Some may ask 'why so much in the UK and why not more global funds?' We all know that more than half of the FTSE’s earnings come from overseas. Do you still get diversification? Yes, I think we do, as they all perform at different times during the cycle," he added.
Premier Multi Asset Distribution requires a minimum investment of £1,000 and has an OCF of 2.04 per cent.
Psigma Income has an ongoing charges figure (OCF) of 1.68 per cent and requires a minimum investment of £1,000.
