Brookes says that massive inflows of money mean defensive stocks are over-valued and have become more economically sensitive – negating one of their key selling points in the past.
"We are trying to get away from traditional stocks for income and move into some cyclical areas of the market where, because there has been a rush for defensives, they are relatively cheap," he explained.
"Cyclicals have priced in a tough backdrop already. However, if you see some slight problems in the defensives now then the premium will start to become a problem."
Brookes runs the Cazenove Diversity Income fund with Robin McDonald, and the two also head up six other multi-manager portfolios.
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
The £31.9m fund aims to deliver capital growth in line with CPI and 4 per cent in income, and data from FE Analytics shows it has achieved the capital growth objective although the yield has slipped to 3 per cent.
Brookes has turned to Europe and Asia for income, holding Cazenove European Income and Schroder Asian Income Maximiser. He has also bought GLG Japan Core Alpha for exposure to an undervalued equity market.
The manager is sceptical about the recent upturn in the markets and currently holds 18.11 per cent of the Diversity Income fund in cash.
"When we think markets are getting risk-on we put cash up aggressively," he said. "We are not bearish, but we are cautious. We are not expecting a massive sell-off, but we are being asked to pay more for the same stuff."
Charles L Heenan, manager of the S&W Kennox Strategic Value fund, is of a similar opinion. He is currently avoiding dividend-paying stocks to preserve his capital.
"All of those dividend-paying stocks are on peak earnings. Those companies with stable earnings streams are in a bit of a bubble," he said.
Peter Boyle, managing director of Kennox Asset management, added: "I think a lot of dividend-paying companies would like to prick the bubble a bit."
IMA figures out today showed the continued prominence of the equity income story, with the Global Equity Income and UK Equity Income sectors in the top-five best sellers.
They were both beaten by the Global Emerging Markets sector, however, although Brookes is not a fan.
"It’s all about the valuation you are being asked to pay. We are unconvinced emerging markets are good value. We see them as over-priced markets gradually returning to a sensible value," he said.
Cazenove Diversity Income is available with a minimum investment of £5,000 and has a total expense ratio of 2.07 per cent.