For textbook theorists, in a world where interest rates appear to be going nowhere fast, sectors nominated for those with the most ‘income appeal’ typically comprise tobaccos, utilities, healthcare and telecommunications. 
To a large extent the risk averse macro-economic environment that dominated the summer heavily favoured companies within these areas.
China’s growth scare, the Volkswagen scandal and its as yet unquantifiable effect on the European motor industry, no real feel for the benefits of ‘devalued’ currencies and the varying impacts of the lower oil price on third quarter earnings – all of these are unknown unknowns.
During the third quarter, a quarter dominated by sharp falls in global equity markets and heightened volatility, reasons for sticking with companies that weren’t directly linked to the economic cycle seemed appealing, both to income and non-income hunters alike.
Performance of index over Q3 2015
Source: FE Analytics
On a global scale, all sorts of ‘attractive yields’ appeared from a variety of different sources - from Russian oil companies through to Brazilian telecommunications groups and US utilities.
But the problem, as I see it, is that companies within these sectors are nothing more than value traps – displaying high absolute yields, often at the expense of capital appreciation.
So, rather than be tempted by perceived income attractions I favour a total return approach to income investing, while at the same time aiming to produce a target yield in excess of our benchmark, the MSCI AC World Index.
Although some stocks may not pay out high absolute dividends the opportunity for a stock to add to total return, through the all-important mechanism of capital growth, is key. The crucial piece in the dividend jigsaw is not to sacrifice capital for the sake of income.
While high absolute yields should generally be avoided in portfolios in my view, so too should permanent style biases.
A perceived scarcity of growth this summer hammered the majority of value stocks as investors took fright and favoured anything quality related.
Yet, as we begin a new quarter the oil price is rallying sharply, and prices of precious metals are coming off their lows for the year. The rotation in styles over the past few months from value to growth and back to value has been extremely pronounced.
And because we dynamically change the bias of the portfolio we are able to profit from varying styles. It is this pragmatic relationship with style that differentiates us significantly from many other income managers.
However, we will tilt towards value when risk appetite is such that we can expect to profit from that (and most highly paying dividend stocks will typically score well in value type factors), but equally, we’ll remove the value tilt, and be happy to hold slightly more expensive names of higher quality when risk aversion increases.
So how does our thinking drill down to the sector level?
Yes, we see income opportunities amongst healthcare stocks but are neutrally weighted in the energy sector, a typical hunting ground for income enthusiasts.
By contrast, we believe there are good total returns to be had in the financials and industrials sectors.
Not perhaps what you would expect from an income fund. But then we’re no ordinary income fund.
Ian Heslop is head of global equities at Old Mutual Global Investors and manager of the Old Mutual Global Equity Income fund. The views expressed above are his own and should not be taken as investment advice.