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A Wise approach to income

Oxfordshire-based fund management group Wise Investment has introduced a UK equity income fund for former Rathbones manager Hugh Yarrow.

The evenlode income fund is the fourth fund in the Wise Oeic range but differs from the others, which are funds of funds, by investing directly in equities. It will comprise 20 to 30 stocks of quality companies that are undervalued and able to produce income.

Yarrow ran several equity income funds at Rathone Unit Trist Management between 2002 and 2009. He will be assisted at Wise by investment analyst Ben Peters, who joined the company in 2008 from university. Yarrow and Peters will both invest in the fund, so their interests are aligned with investors.

The portfolio will not be constrained by benchmark weighting, industrial sector or market capitalization. It will have an initial target yield of 4.3 per cent, which will have the potential to rise over time.

Yarrow says that most of the funds in the IMA UK equity income sector are big and invest in many of the same companies because of their size. This smaller fund can take a more concentrated approach and will be capped if its size starts to hinder performance.  Its biggest sector positions will be food and drink, professional media and niche global manufacturers.

Turnover of stocks in the portfolio will be low but a stock will be sold if another is found that offers better value or if the reason for holding a stock changes. Yarrow and Peters will only invest in businesses they understand and have confidence in over the long term. These will be undervalued firms that stand the test of time, are capable of providing good returns and have sensible management teams at the helm who do not make rash decisions and whose interests are aligned with shareholders.

UK equity income is a difficult hunting ground since many companies have reduced or cut dividends, but a smaller fund could find opportunities among small and medium sized companies that would be difficult for bigger funds to access.


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