Although the FTSE 100 had gained about 1 per cent today, at the time of writing, the blue-chip index is on track to make its biggest weekly loss in more than a year.
The sell-off hasn’t sent everybody running for hills. Equity income star Neil Woodford thinks the correction will be short-lived and is just a reflection of the market adjusting to the likelihood of slower growth in the years ahead.
Wouter Volchart, however, thinks the market will remain weak for some time to come and has no gearing in his Henderson Global Trust as he doesn’t want to be hit with exacerbated losses.
Although the sell-off has dominated the news agenda this week, it’s not all we’ve been focusing on.
We’ve picked out some of our favourite stories of the week for you to take a look at.
From all of FE Trustnet, have a great week … and good luck when the bell rings on Monday morning!
BP all over again? Dividend-risk in UK Equity Income funds exposed
In keeping with our focus on income, FE Trustnet editor Joshua Ausden examined which UK equity income funds are most exposed to dividend risk, as a single company generates about 10 per cent of their yield.
The research highlighted UBS UK Equity Income, BlackRock UK Income and Scottish Widows UK Equity Income as some of the funds most reliant on one stock.
Schroder Income and Jupiter also featured on the list.
Source: FE Analytics
Tim Cockerill, investment director at Rowan Dartington, says dividend risk can be a big problem for the income funds, especially those focused on the UK where the dividend market is dominated by a small number of payers.
However, the fund groups themselves had a number of responses to the study - with some revealing they are working to increase the diversification of holdings and others conceding that dividend risk is part of following a high conviction strategy.
FE Trustnet income campaign: Why most equity income funds are letting you down
As part of our ongoing income campaign, we took a look at every fact sheet in the IMA UK Equity Income sector to see what information is being offered to investors.
We revealed that just 20 per cent of funds in the sector include their dividend history in their fact sheets, even though the early response to our campaign showed investors want easy access to this kind of information.
Even more concerning was the fact that 13 per cent of the fact sheets didn’t even include the fund’s yield.
Although we believe yield is not a satisfactory metric for income, it’s better than nothing and we couldn’t believe such a large chunk of the sector is ignoring it.
We’ve contacted every group with a UK equity income fund and will update you next week on how some of the industry are looking to change how they communicate income to you.
We’ll also be publishing more studies on how much income you’ve earned using our in-house research.
Is that it or will the FTSE keep falling?
Following the FTSE 100’s biggest fall in 16 months on Wednesday, FE Trustnet senior reporter Alex Paget looked at whether investors should look to add risk now or wait until the outlook for stocks becomes clearer.
A number of fund managers told us that now is probably not the time to be a contrarian and try to add risk, as they expect equities to have a bumpy ride over the coming weeks.
Performance of index since 4 Sep
Source: FE Analytics
Geir Lode, manager of the £160m Hermes Global Equity fund, is one who doesn’t think equities will bounce back any time soon as there are still plenty of headwinds in the form of a low global growth outlook, geo-political tension across the globe and the spread of Ebola.
“I think we will see more market volatility going forward because there are more macroeconomic events on the horizon,” he warned.
Nigel Thomas’ successor and the future of the AXA UK Select Opps fund
Later in the week, we caught up with AXA’s Chris St John, who is lined up to take over the £4.3bn UK Select Opportunities fund when Nigel Thomas eventually retires.
Although there is no suggestion Thomas’ retirement is on the cards, AXA has been refreshingly forward-thinking in revealing its succession planning.
Just think how badly investors react to the unexpected movement of a fund manager, as was seen in the departures of Richard Buxton and Neil Woodford from their former employers.
The manager told us that he runs money in much the same way as Thomas with a focus on growth and long-term investment horizons, although there subtle differences in their approaches.
St John, who is support manager on launched the four crown-rated AXA Framlington UK Mid Cap fund in March 2011 and has taken it to the top of the IMA All Companies sector since inception.
Alternatives to First State Global Emerging Markets Leaders
It was also announced this week that the £3.2bn First State Global Emerging Markets Leaders fund will leave the IMA Global Emerging Markets sector in December and join the IMA Specialist sector.
The fund has been removed from the sector because it doesn’t hold enough in emerging market equities - it has 14.4 per cent in UK equities and 13.9 per cent in US equities, according to its latest fact sheet - although exposure to developed market companies with significant business in the emerging world has long been part of its approach.
Although many investors may be completely happy with the fund’s positioning and performance, a change of sector could prompt some to review their emerging markets exposure so we took a look at three funds for those that might want more pure exposure to the asset class.
