Writing in the investment trust's annual report, he stated: "We expect moments of significant asset price fluctuation as investors take occasional fright at the extent of the challenges faced, while the recent catastrophes in Japan tell us that there are physical risks in addition to geopolitical dangers."
Dunedin Income Growth saw its net asset value (NAV) per share reach 19.6 per cent in the year to the end of January, compared with 18.1 per cent from the FTSE All Share.
Performance of trust vs sector since Jan 2010
Source: Financial Express Analytics
It returned 23.7 per cent to investors, compared with 16.8 per cent from the IT UK Growth and Income sector.
Jeremy Whitley, manager of the closed-ended vehicle since November 2009, said changes to the portfolio had been "reasonably brisk" over the year, and have been with a view to achieving three aims: enhancing the trust’s dividend-paying capacity, diversifying its revenue base, and improving the portfolio’s quality.
Europe-listed groups Zurich Financial Services, GDF Suez and Nestle were all added to the portfolio, while Whitley pulled out of household care manufacturer McBride, saying it was losing its pricing power in an increasingly inflationary environment.
The manager also diversified his exposure to income-generating sectors such as oil and pharmaceuticals by upping its holdings in Total and Roche.
"One expects that the year ahead will be one where companies, and by extension investors, will have to work harder to make money," Whitley warned.
"Equity valuations, whilst more expensive than a year ago, are not demanding relative to history. However, it seems less likely that company earnings will surprise on the upside."