Top UK equity income managers tell Charlotte Richards which stocks and sectors they are backing.
At the beginning of August, the Bank of England cut its forecast for economic growth for 2012 to almost zero. This came a fortnight after data from the Office for National Statistics showed the UK economy shrank by 0.7% in the second quarter of the year.
This gloomy picture was very different to the one painted in May when the Bank predicted growth of 0.8% and governor Mervyn King claimed the UK would be “unscathed” by the eurozone storm.
Amid the negative news and ensuing uncertainty, the popularity of UK Equity Income funds has fluctuated. While the first six months of the year saw inflows, IMA data for June showed the sector entered negative territory with outflows of £17m, making it the seventh worst selling sector of that month. However, it rebounded in July with net retail sales of £96m.
What are the UK’s best income plays?
Despite the difficult economic environment in the UK, managers are still confident about the income opportunities the UK market offers.
The £113m Cazenove UK Equity Income fund, managed by Matt Hudson, benefited from a move back into risk assets and a focus on more cyclical stocks at the end of last year.
This was done on the basis that although the macroeconomic background was negative, the valuation of risk assets had become extremely cheap.
“Almost as cheap as they were after the Lehman crisis,” the manager says.
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