Brooke, manager of Troy’s £860m Trojan Income Fund, suggested that some stock market participants could be anticipating “too strong a recovery” and argued against introducing too much risk into portfolios at the present time.
“Our concern is that equity valuations are already quite stretched and that corporate earnings may not prove sufficiently strong to carry the market higher, particularly as a large amount of capital has moved into equities from other asset classes in search of income,” the manager said.
“We find ourselves in an uneasy limbo. Dividend prospects for the next 12 months are looking quite encouraging. However there is a lingering fear that some parts of the equity market are expecting too strong a recovery.”
During October, the Trojan Income Fund added to “solid yield stocks which offer good value” rather than bringing significantly more risk into the portfolio. This move was achieved by adding to existing holdings in names such as Dairy Crest, Pennon Group, AstraZeneca, Unilever, SSE and British American Tobacco.
“However if hope prevails over fear in the next few months then our investors may have to settle for dull returns for a while,” Brooke added. “It has happened before and we believe that this is not a time to take too much risk.”
