Among the UK Equity Income funds riding this year, high having beat the sector average, include options from Evenlode (Hugh Yarrow) and Rathbones (Carl Stick), while the likes of Woodford Investment Management (Neil Woodford) and Troy Asset Management (Francis Brooke) have also seen performance recover.
These a sense of familiarity looking at these funds’ top-10 holdings with the likes of AstraZeneca, GlaxoSmithKline, British American Tobacco and Unilever dominating proceedings.
While it has long been known how income funds cluster around the same yielding mega caps, that these have come back into favour will surprise many who anticipated continuation of the cyclicals revival of last year.
“The change in leadership to more defensive sectors was particularly pronounced in the UK stockmarket [in February] and this was exploited by defensive stalwarts such as Woodford, Evenlode, Trojan and Rathbones,” says Gavin Haynes, managing director at Whitechurch Securities.
“Overseas equity markets enjoyed a strong rally over February, but it was also quality and defensive sectors leading the way as bond yields across the world fell substantially.
“The best performing sectors were the defensive areas of healthcare, staples, utilities, IT, which suggests that markets continue to climb a wall of worry rather than being driven by bullish euphoria”.
Presumably towards the latter part of the most unloved bull market in history, euphoria is not necessarily coming from those “cautiously optimistic” investors, rather from the corporates themselves.
According to Fidelity International’s latest analyst survey – of 146 participants – management confidence among the world’s largest companies has reached its highest level since 2014, turning from negative last year to positive in 2017.
“With cyclical forces evident across all regions and sectors, chief executive officers now regard demand-led growth as the main driver of earnings growth for their companies, whereas last year they were looking to cost efficiencies,” Fidelity said.
“This global cyclical acceleration is a rising tide that lifts all boats.”
