This week’s major talking point within the fund management world was that Montanaro UK Income and Evenlode Income were the latest funds to fall victim of the Investment Association’s rules surrounding the IA UK Equity Income sector, having now been moved to the UK all companies space after failing to achieve 110 per cent of the FTSE’s yield over the last three years. 
This comes after an announcement from the IA earlier this year stating that the firm will review its criteria for funds to earn a place within the equity income sector over the coming months.
In other fund-related news, it was announced yesterday that EdenTree’s sector-topping fund manager Andrew Jackson will take over the helm of the Miton UK Value Opportunities fund, following the impending departure of star duo George Godber and Georgina Hamilton.
To find out how investment professionals have reacted to this news and to take a look at our other favourite stories this week, have a browse through our round-up in the list below.
From the team at FE Trustnet, we hope you have a great weekend!
Another top-performing fund booted from equity income sector: This must be the last?
Starting off with the equity income sector and in this article news editor Alex Paget looked at whether it is justified that Evenlode Income will be booted across to the IA UK All Companies sector.
While the fund hasn’t hit the required 110 per cent yield of the FTSE All Share over the past three years, it has increased its dividend in every year since launch and paid out more than the sector average in total dividends over the past five years.
Of course, it is very difficult to pin point what actually makes an equity income fund – which is why the IA is launching a consultation into the sector’s requirements.
In the article, though, Paget showed how the fund’s yield has only dropped because the unit price has increased over time.
Fund’s dividend (in pence per unit), unit price and yield between 2011 and 2015
Source: FE Analytics
That being said, it created quite a stir within the comments section! In series of articles next week, though, we will be focusing on the IA UK Equity Income sector, the potential changes to its criteria and look at some of the best ‘income’ funds in the IA UK All Companies peer group.
Andrew Jackson to manage CF Miton UK Value Opps – should you buy, hold or fold?
Following the aforementioned news that Andrew Jackson will take over the helm of the Miton UK Value Opportunities fund, reporter Lauren Mason asked a number of investment professionals their thoughts on this and whether it’s good news for both Miton and existing investors in the fund.
While the consensus was overall positive given Jackson’s stellar long-term performance track record, including a top-quartile return during 2008’s financial crisis, some voiced concerns surrounding the manager’s switch from growth to value investing.
Jason Hollands, managing director at Tilney Bestinvest: said: “The mandate is a little different from [Jackson’s] previous fund because of its clear value style, so investors who particularly want that approach might still be inclined to follow George Godber and Georgina Hamilton to Polar Capital or look at alternative UK value funds such as Henry Dixon’s Man GLG Undervalued Assets fund.”
Click through to find out other views surrounding the change in management.
The UK funds that tick (just about) all the boxes you can think of
This was very detailed study which was craftily put together by editor Gary Jackson.
He pointed out that while the past is no guide to the future, his in-depth analysis of the Investment Association universe has found a handful of funds – not necessarily the ones you might expect – that have come very close to achieving an ideal performance profile in recent years.
To find out which funds have made the cut, he looked at decile rankings of the IA UK All Companies sector for cumulative five-year returns up to the end of 2015 as well as the annual returns of 2015, 2014 and 2013. He also added to this the decile rankings for annualised volatility, maximum drawdown and downside capture and did the same for alpha generation, Sharpe ratio and upside capture.
This gave him 10 decile rankings for each fund in the sector; adding these together gives a simple score, where a 10 shows a fund has been first decile in each metric and a 100 would indicate 10th decile performance in each.
Click through to see which UK funds made the grade.
De Tusch Lec: Why Artemis Global Income has underperformed
Artemis Global Income’s performance has been little short of spectacular since its launch in 2010. It is the top-performer in its IA Global Equity Income sector over this time with returns of 107.16 per cent, compared with gains of 69.19 per cent from the MSCI World index and 65.07 per cent from its peer group composite.
However, it has experienced something of a slowdown over the past year or so and is down 9.06 per cent since it peaked in April 2015, compared with losses of 5.1 per cent from its sector and 4.45 per cent from its benchmark.
Manager Jacob de Tusch Lec blamed this on, among other factors, a low exposure to emerging markets, which have done well this year. However, he said he has no plans to dramatically increase his exposure to this sector, attributing its rally to the Federal Reserve’s stay of execution over raising interest rates.
“If we start at the main problem which is debt, the endgame is the same,” he explained. “There is too much debt globally. There’s too much dollar-denominated debt, especially in emerging markets, even more than we had in 2007.”
“What we are talking about is tactical versus strategic – tactically, there may be an argument for increasing exposure to emerging markets in the short term, but if you have a long term horizon, there isn’t.”
“Strategically, if you have a long term horizon, you don’t want to go there, because fundamentally nothing has changed, there is too much debt.”
