The UK Equity Income Fund market is highly competitive. This fund has really struggled against the FTSE All Share for several years. However, there has been a change in management and Stuart Young came on board in November 2018. In 2019 and year to date he has outperformed the index. This is the same over 12 months and since he took over the fund. On the basis that the fund has had a difficult period this might be a fund to watch rather than invest in.
Stuart is looking for strong businesses which can weather economic cycles. Examples would be:
- High Repeat Business – Sage is an example of this where 80% of clients are on subscription and they are growing their income stream by around 8% a year
- Low Cost Provider – Sabre Insurance is an example where they avoid the mass market and target younger and older drivers with impaired driving records. They have strong operating margins, keep costs low and pay a dividend of 7%
- Intellectual property – Games Workshop is a well-run global business with its own design studies and logistics. It has a 100% return on capital and returns money to shareholders
- Sales networks – Prudential is held for the Asian part of the business where it sells health and protection plans in Malaysia and Hong Kong