Gary Potter and Rob Burdett have started adding the Liontrust First Income fund to their Thames River Distribution fund. Not only is the yield good, they say, but its manager, Jeremy Lang, is well positioned to benefit from recovery.
According to Burdett, the Liontrust First Income fund was “quite poor for some time” but its income payout levels have risen.
“It’s been consistently growing its dividend and the yield is very attractive,” Burdett says. “It’s over 6%. We started to add to it in the last few weeks.”
Burdett says that although performance of the Liontrust fund so far this year is still below average, it has improved markedly over the past three months. Indeed, from July 1 to September 22 the fund was first quartile, according to Morningstar. Over one and three years to September 22, however, the fund was fourth quartile.
“After three years of poor returns it’s looking good for the conditions for this fund,” says Burdett, “at the very least in relation to other income funds.”
“Jeremy [Lang] tends to look at three areas of the market, one of which is really bombed-out stocks. Lots of companies have been sold recently, and many sectors have been hit. The prospect for recovery is good, and being paid 6.5% while you wait is a good insurance policy. It’s a very good time to look at this fund again.”
The addition of Liontrust Income has brought the number of UK equity income funds in the Thames River Distribution portfolio to four. The others are Neptune Income, Schroder Income Maximiser and PSigma Income.
According to Burdett, he and Potter are considering adding the Liontrust fund to more of their portfolios.
Of the 22 underlying funds in the Distribution portfolio, those with the largest weightings include Quantum UK Absolute Return, Neptune Income and Old Mutual Corporate Bond.
As at July 31 the Distribution fund had 46.5% in fixed interest, 22.4% in international equities and 13.2% in British equities.
From launch last October to September 22, the Thames River Distribution fund is third quartile in the IMA Cautious Managed sector. It ranked 68 out of 106 funds and produced a fall of 12.04% compared with a sector average fall of 9.87%.