Royal & SunAlliance Investment Management is cutting the yield requirement on its UK equity income O...
Royal & SunAlliance Investment Management is cutting the yield requirement on its UK equity income Oeic, giving it greater scope to buy into high growth companies, writes Leo Bland.
The yield requirement on the fund is being cut from 125% to 110% of the yield on the FTSE All-Share from 125% and the fund has boosted its technology weighting to a slightly underweight position.
Michael Felton, who runs Royal & SunAlliance Equity Income, said: "As a house we are firm believers in the technology story - we are fully weighted to technology and we have had another year of good performance. We do not see the boom as a passing fad."
The group could have introduced corporate bonds to provide yield allowing the remainder of the portfolio to be focused more towards growth stocks but Royal & SunAlliance felt the fixed interest portion would not provide much capital appreciation.
Felton said: "We have taken the opportunity to increase our technology, media and telecoms exposure. The fund already had a good weighting in telecoms and we have added to our media holdings with stocks such as Trinity Mirror."
Felton bought into technology stocks including Baltimore Technology, Kewill and Sema at the end of January to capture their potential capital growth. Felton is also running a barbell equity strategy within the fund, with low or zero dividend yielding companies such as Sema, Saatchi & Saatchi and Reuters at one end and high yielding stocks such as Scottish & Southern and United Utilities at the other extreme.
Felton added: "The move to cut the yield requirement on the fund has also allowed us to reduce our exposure to areas such as the financials sector as well as the consumer defensives such as Diageo and Unilever."
The fund sold out of several banking stocks at the end of January including Alliance & Leicester and Bank of Scotland as well as reducing its holdings in Barclays and Lloyds TSB. It has also reduced its holdings in CGU and Sun Life & Provincial as well as selling out of United Assurance after its takeover bid from Royal London.
Royal & SunAlliance Equity Income has been increasing its weightings in the pharmaceuticals sector on the back of what Felton believes is an improvement in sentiment in the US pharmaceuticals sector. The fund has recently been buying into Astra Zeneca and Smith-Kline Beecham.
Felton is also keen on the oil and gas sector in the belief that the demand and supply imbalance in the oil market will continue to benefit the oil price.
Royal & SunAlliance Equity Income has an frAA rating and is ranked 16 out of 84 funds in the UK Equity Income sector over three years on an offer to bid basis with net income reinvested.
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