Alliance Trust UK equity income comprises 30-45 UK stocks with the aim of producing income and growth. It is benchmarked against the FTSE All-Share Index (Total Return) index, but manager Neil Tong will be benchmark aware rather than a slave to the index.
Tong is head of UK equities and has more than 22 years’ investment experience, including 12 at Alliance Trust. He will be supported by four analysts.
Stock selection is important when constructing the portfolio but Tong and his team will also be influenced by top-down economic factors and market or sector themes. They will view the UK in global terms and if the fund has a bias to wards growth or value, this will be due to stock selection, not a style preference. They will also invest for the long term, with hiolding periods typically around three years.
The team has a universe of 350 stocks and each analyst produces a key investment drivers and catalysts document which determines, among other things, price targets that will trigger a review of each holding. Meeting a price target will not necessarily lead to a sale of a stock – stocks are more likely to be sold on the basis of an event or a change in the reason for holding it.
The weighting of each stock in the portfolio depends on the level of confidence the team has about its return prospects and positions can be up to 4 per cent overweight relative to the fund’s benchmark index.
This fund could potentially tap into rising dividends that can make a major contribution to returns over the long term. However, it does not allow regular savings for direct investments into the fund and some investors may feel that the £5,000 minimum investment is relatively high. In contrast, Axa Framlington’s new UK blue chip equity income fund allows monthly investments from £50 and has a lower minimum of £1,000.