Thames River’s Robert Burdett has declared that many traditional UK equity income funds are letting investors down through poor income returns.
Speaking at the Alpha Generators investment seminar, Burdett (pictured), the asset manager’s co-head of multi-manager, explained Thames River’s alternative approach to income funds – which aims to meet investors’ income expectations while managing risk.
Burdett said: “In the past investors didn’t have to take any risk to get income. However, many traditional UK equity income funds are now letting investors down with poor levels of income.”
Burdett suggested a number of alternatives to popular equity income funds, which he argues meet this criteria. The £46m PFS Chelverton UK Equity Income fund is a small-cap fund with returns more than double the average.
The £2.4bn Veritas Global Equity Income is described by Burdett as a “solid and secure” fund, containing 35 stocks, carefully selected for growth potential that is based on Veritas’ philosophy that you should “buy bees for the honey, not the buzz”.
Burdett also highlighted the £143m Somerset Emerging Markets Dividend Growth fund, arguing that income in emerging markets is peaked to move into the equity space, due to the lack financial crisis and property bubble in the region.
A number of other portfolios were also suggested by Burdett, including the Barclays Asian Real Estate Income fund, a maximiser fund covering property assets with double digit income.
Also named was the Carador Income fund, a loans fund with a 4 per cent yield per quarter, and the GCP Infrastructure fund, an open-ended investment company which invests UK infrastructure debt.
According to the manager, the GCP fund is an alternative way of providing “dependable income” through its focus on government-backed infrastructure such as UK PFI and renewable energy projects.
Burdett says Thames River’s approach seeks out “natural yield” that comes from a capital base which is both sound and shows potential for growth while most importantly, identifying potential risks to income.
Bestinvest managing director of business development and communications Jason Hollands says: “It really depends on what you look for as an investor. There are some who buy equity income funds because they specifically want to take the yield. However many of these funds are also run on a total return basis and investors are happy to buy those funds and see the yield reinvested.”