Question: Equity Income Funds have suffered over the past year thanks to the dividends cut by UK companies. What assurances can the panel give me that Equities have ridden out the storm and are once again an attractive alternatives to over sea funds?
Leigh Himsworth - Gartmore
I don't believe it is the case that the performance of UK equity funds is attributable to dividend cuts. I believe the underperformance of UK equity income funds in general is more to do with the fact that the rally in the stock market has been dominated by highly indebted, cyclical stocks. These stocks have benefited from both the monetary stimulus measures and low interest rates. During the rally, we have found that many good quality companies i.e. those with stable earnings, strong cash flows, low debt and operating in less cyclical areas of the market have been left behind. Indeed, many good quality companies have not cut their dividends and are giving my colleague, Dan Roberts who runs the Gartmore UK Equity Income Fund, plenty of cause for optimism and plenty of opportunities going forward. With a three to five year investment horizon and with a good UK equity income fund manager there is every reason to believe that now is potentially an attractive time for investors to look at UK equity income funds. However, you will appreciate that I'm not in a position to provide investment advice here.
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