Top five funds attracting money over 1-year
| Rank | Fund |
|---|---|
| 1 | Invesco Perp High Income |
| 2 | Invesco Perp Income |
| 3 | Artemis Income |
| 4 | Neptune Income |
| 5 | SWIP MultiManager UK Equity Income |
Source: Trustnet.com
Over the last twelve months the Artemis Income fund has beaten the sector in terms of income and succeeded in growing its distributed income. Combined with an historic yield of 6 per cent, this fund represents a good source of income for investors.
Five-year performance of the Artemis Income fund
Source: Financial Express Analytics
Fund manager Adrian Frost, believes that the reason the fund has performed well relative to its peers is its low exposure to cyclical stocks. When the economy is in a downturn the products made and services provided by cyclical companies are in lower demand. Examples of such companies are those in the automobile, steel and housing industries.
Instead, the fund has been investing more heavily in defensive non-cyclical companies such as utilities and pharmaceuticals – stocks which are not heavily tied to the performance of the overall economy.
The investment strategy employed by fund managers Frost and Adrian Gosden is producing good results. The fund has a volatility of 14.35 per cent compared with the sector volatility of 15.18 per cent – making it less risky than the average UK Equity Income fund.
In addition, we are able to use the ‘Alpha Rating’ to quantify just how skilful the manager really is. Far from simply telling us that a manager can make money in a rising market, Alpha show how much value the manager is adding beyond what would be expected from the market conditions.
They have a rating of 3.87 over a three-year period which means that the fund outperforms the sector average by almost 4 per cent each year. Such scores are considered extremely impressive by professional investors and shows that the managers are successful stockpickers.
In these difficult times, when absolute return in equity investment is impossible, investors in equity income funds should be taking a long-term view and looking for fund managers who can minimises losses, provide income and ensure the fund is well placed to benefit when the market turns.
The key to future success will be getting back into cyclicals at the right point. Leaving it until the market has bottomed out will mean prices are too high, getting in too early will lead to greater losses.
The fund management team of the Artemis Income fund believe that there are some blue-chip bargains out there and they will be getting back into cyclicals in 2009. "Our new investments going forward will be cyclical companies, but only those that have strong balance sheets and are not heavily indebted," Gosden says.
"For example, we like the recruitment consultancy Hays - it's clearly a very cyclical company, but has plenty of cash on the balance sheet and the dividend will be the last thing to be cut. We also like the retailer Next. It's well managed, and its dividend is three times covered by predicted earnings so, even though earnings are likely to be hammered next year, the dividend is safe."
We believe that this fund is well placed in defensive stocks and bonds to withstand some of what the market throws at it and to continue distributing a good dividend. Moreover, the fund management are actively seeking out new investments with a view to capitalising on an upturn in the fortunes of blue-chip companies.
With a combination of defensive and active management employed by two experienced fund managers this fund should continue to attract money and grow its existing client base.