Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.
Most of the recent headline news has focused on the general election, but when it comes to the stock market, it is normally the health of the economy and level of interest rates that drives the returns. The latest data suggests that it is only a matter of time before the Bank of England announces its first cut, which might tempt investors to look for more sustainable sources of income.
A good example is the FTF Martin Currie UK Equity Income Fund that offers a core exposure to high quality, dividend paying companies. It aims to generate an income that is higher than that of the FTSE All-Share Index, together with investment growth over a 3 to 5 year period after all fees and costs are deducted.
A member of the Select 50
The management team is fixated on valuations and has created a concentrated portfolio made up of what they believe to be the highest quality dividend payers in the UK. It is a common sense approach to investing that has helped to earn it a place in Fidelity’s Select 50 list of handpicked funds.
Managers Ben Russon, Will Bradwell and Jo Rands only look at companies that pay dividends and avoid those with insufficient free cash flow to drive dividend growth. About a third of the portfolio is invested in stocks with a high and sustainable yield, with the fund divided between dividend yielders and dividend growers.
Portfolio and outlook
At the end of May the £911m fund held just 49 different stocks with the 10 largest positions accounting for around 38% of the assets. These included well-known names such as Shell, BP, Unilever, AstraZeneca and Rio Tinto.
FTF Martin Currie UK Equity Income Fund - top 10 holdings
Source: Fidelity International, 31.5.24
The managers invest across the full range of market valuations, although the majority of the stocks are in the mid or large-cap brackets. Their biggest sector allocations are Consumer Staples, Financials and Industrials.
In the latest monthly update they said that the data demonstrates an improving backdrop in the UK, which backs their view that the underlying economic strength has been underappreciated by the wider marketplace. “Valuations remain attractive in the UK market, even following the recent strong performance.”
Performance
Since inception in April 1988 the fund has generated an average annual return of 8.46%, which was marginally ahead of the 8.36% from the FTSE All-Share benchmark. Over the same period the equivalent figure for its peer group was 7.59%. Please remember past performance is not a reliable indicator of future returns.
How much income does it pay?
One of the main attractions of the fund is the high yield available from the income units. This currently stands at 4.59% with quarterly distributions. Please note this will fluctuate and is not guaranteed. If interest rates start to come down there is a good chance that the dividend-paying shares that it invests in could become more sought after.
How do the costs stack up?
It is good to see that the ongoing charges figure is just 0.51%, which seems like good value for an actively managed UK equity fund.
More on FTF Martin Currie UK Equity Income Fund
(%) As at 30 June |
2019-2020 | 2020-2021 | 2021-2022 | 2022-2023 | 2023-2024 |
---|---|---|---|---|---|
Martin Currie UK Equity Income Fund | -11.5 | 19.1 | 3.8 | 5.2 | 11.7 |
Past performance is not a reliable indicator of future returns.
Source: Morningstar, share price total returns from 30.6.19 to 30.6.24. Excludes initial charge.
Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This fund invests in a relatively small number of companies and so may carry more risk than funds that are more diversified. This fund uses financial derivative instruments for investment purposes, which may expose the fund to a higher degree of risk and can cause investments to experience larger than average price fluctuations. Select 50 is not a personal recommendation to buy or sell a fund. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.
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