In our Monday Manager series, this week Emma Mogford fund manager of the Premier Miton Monthly Income fund discusses her less than traditional path into equity income investing, overcoming behavioural biases and having courage in your conviction.
What led you to become a UK equity income manager?
Studying Zoology with a dissertation on the intelligence of rooks isn’t a traditional path into fund management. However, a lot of what I enjoyed about scientific research applied to researching good investments and I was fascinated by the global economy. Working at two income investment houses, Neptune and Newton, I discovered my love of equity income investing.
See also: Track to the Future – with Premier Miton’s Jonathan Willcocks
How do you divide up responsibilities with Mahgul Ansari?
Mahgul is assistant fund manager, and supports me across a range of tasks from generating new investment ideas to client reporting. Her previous experience as an accountant has proved very valuable in identifying quality companies that are mispriced and building valuation models.
What are you looking for to ensure a company has a reliable dividend and growth?
Every company in the portfolio goes through our 10-point checklist, which helps us identify growth and reliable dividends. We look for good cash generation and a strong balance sheet. But we also go further and look at things like a company’s long-term track record of paying dividends and their accounting quality.
UK equities have been out of favour – are you starting to see a change in sentiment?
I think 2025 could mark a turning point for UK equities. Outperformance of the UK market relative to the US market since the start of the year suggests that money is flowing into the UK.
The starting point is good with an attractive valuation on UK equities relative to their global peers. UK equities could also benefit from a style shift away from growth to value. Given the big increases in valuations in US equities already, I believe returns in the next decade will be driven more by dividends and earnings growth. If the market is looking for cash generative dividend paying stocks, the UK market is chock-full of them.
See also: Premier Miton’s Birrell discusses risks of ‘benign’ market
In the recent market volatility, did you make any changes to your portfolio?
We didn’t make any major changes in the recent volatility. However, we were happy to add to a couple of our positions when the market offered us some bargain prices. I’m a big believer in disciplines, which help to overcome behavioural biases. One of our core disciplines is having target weights. That means when a stock falls significantly, we review it and either the investment case holds and we are happy to buy more, or we sell it. It is simple, but not easy. In my experience, the best investment decisions have been the least comfortable ones. That was true in the weeks after liberation day.
Financials is the biggest sector in the portfolio, with Legal & General in the top 10 holdings. Where else are you invested and what appeals about this sector?
Financials are the biggest sector in the Premier Miton Monthly Income fund. We have seen the banks deliver some out-sized returns for investors in the higher interest rate environment. Indeed, Natwest was up nearly 100% in 2024!1 We like insurance companies such as Legal and General, which is experiencing good growth in its pension business, and non-life insurance companies, which are benefitting from recent price increases.
What’s your top concern for UK equities right now?
The biggest risk for UK equities today is if UK economic growth disappoints. A mistake by the government, which results in much higher bond yields or lower growth could mean UK equities underperform. However, for many of our companies, it is global growth rather than UK growth that matters the most.
And in which areas are you seeing opportunity?
We are finding opportunities in several sectors right now but 3 stand out: consumer, property and utilities. We think there is plenty of pent-up spending among UK consumers. The savings rate is running at a historically high level, and we think lower interest rates later this year could help unlock spending, so we have added to consumer discretionary stocks. We have been increasing our exposure to property stocks too, which is very out of favour and valuations are at multi-decade lows. One contrarian area we are excited about is electricity transmission utilities where we believe the latest regulation offers good return and big growth potential.
What has been the best piece of advice you have been given?
The best advice I was ever given was ‘the best fund managers work out what they are good at, and then they stick to it’. Of all the great fund managers that I have studied, no two have had the same approach, but they have all had courage of their conviction.
Good decision making requires a clear framework which is why I wrote down our process in an owner’s manual. I only know of two other managers with an owner’s manual – Warren Buffet and Terry Smith, so we are in good company. We want to be known for our focus on quality, income and discipline.
