No one investment style dominated the performance of the UK equity income sector over the 12 months ...
No one investment style dominated the performance of the UK equity income sector over the 12 months to 1 October, according to Standard & Poor's Fund Research review.
Its ratings book for the UK Income sector, which includes altered frA ratings for funds in the sector arrives on Standard & Poor's clients' desks on Friday this week.
The separate sector overview, which Investment Week obtained last week, shows that the top 10 funds in terms of straight performance show a spread between growth, value and barbell approaches.
Of the 10, four were run on a barbell approach, including ABN Amro Equity Income and LeggMason Investors UK Income, four were run on a value-style, including Newton Higher Income, and two were managed along growth lines, such as Gartmore UK Growth & Income.
James Tew, head of research at Standard & Poor's Fund Research, said: "UK equity income is the critical battleground where proponents of value investment successfully challenge those who champion growth.
"Of the top 10 funds which score highest on our quantitative screen, a measurement of three-year rolling performance, four are straight value, two are growth and four have adopted a barbell strategy."
But he said it had been a tough year for the sector as a whole and only two funds outperformed the FTSE All Share Index over the review periods of five, three and one year to 1 October 2000.
He said: "ABN Amro Equity Income Fund, the number one fund over all three periods, is the product of George Luckraft's aggressive barbell strategy. The fund has also produced a steadily rising annual income.
"Deutsche UK Equity Income, also top decile over all periods, is managed by Adrian Frost in a flexible style, successfully switching between growth and value."
The year, which was characterised by extraordinarily violent market movements, forced many fund managers to consider changes to their management strategies. Yield was not hard to achieve, he said.
Tew said: "As growth exploded, value managers, such as Toby Thompson at Newton, had to reconsider long held investment strategies. Thompson decided that his practice of buying at a yield premium and running the stock to market yield had weathered similar conditions in all but their present scale.
"He stayed with his strict value approach and, despite a third quartile return for the 12 months to 1 October 2000, maintained top decile returns over three and five years to date."
The problem that such divergence of performance has created for managers is the increased disparity of performance within the peer group. However, hugging the benchmark has not been the hallmark of many of the successful managers.
Tew said that the average deviation from the benchmark FTSE All Share Index was 41.9% and from the sector average 32.0%.
Six of the top 15 performers on the three-year quantitative screen showed above average deviation from both the benchmark and the sector average.
The average volatility in the sector was 4.34 and the average beta was 0.9 compared with 4.03 and 1.0 12 months ago.
The UK equity income sector remains relatively low profile in periods of low inflation and this was reflected in the fact that there were only two new entrants to the sector over the past 12 months.
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