Five Years at the Helm of UK Equity Income Unconstrained
15 January 2014
Global asset manager, Standard Life Investments this month celebrates the fifth anniversary of Thomas Moore’s tenure of its £349m UK Equity Income Unconstrained Fund. Thomas Moore took over management of the Fund on 1 January 2009 when assets stood at £13m. Since then, the Fund has produced top decile performance over six months, one, three and five years, returning 169.2% to investors versus the peer group average of 96.1%*.
The Fund is designed for investors seeking an attractive level of income, alongside the potential for capital growth over the longer term. It aims to deliver a yield of 110% of the FTSE All-Share yield on a rolling three-year period. Its unconstrained mandate allows the manager to broaden his investable universe beyond the income-generating stalwarts found in more traditional UK equity income funds.
Thomas Moore said of the Fund:
“Our unconstrained approach to UK Equity Income has delivered two key benefits for clients – first, by enhancing total return through a focus on dividend growth, which avoids the risk inherent in slow-growing value traps; second, by differentiating the portfolio and avoiding large positions in a few stocks and sectors, we have provided improved diversification and managed risk.
"The Fund will continue to scour the UK market to select our highest conviction ideas without any reference to index weightings. In recent months, much debate has focused on the growing valuation attractions of large-caps relative to mid-caps and small-caps. While the Fund has taken a position in several large cap stocks with particular company-specific attractions, we remain extremely selective in the context of negative earnings growth across a wide range of large-cap dominated sectors**. Conversely, while mid-cap and small-cap valuations are no longer universally appealing, we still see plenty of stocks with positive earnings momentum at reasonable valuations. Furthermore, the ongoing improvement in economic momentum underpins the earnings of economically-sensitive stocks, making it quite rational at this stage in the cycle for valuations to move ahead of earnings.
"The Fund’s top decile performance has been achieved during a period of intense economic and market uncertainty. Looking to the year ahead, I am confident that the discipline of our unconstrained approach and our Focus on Change investment process, backed by the strength of our research resource, stand us in good stead to deliver for our investors.”
* Morningstar, bid to bid as at 31/12/13 – Peer Group; IMA UK Equity Income Sector
** IBES forecast negative EPS growth in 2014 for Pharmaceuticals -7% , Food Retailers -9%, Utilities -3%, Oil and Gas -14%, Mining -19%. Source; IBES; Thomson; Deutsche Bank (08/01/14)