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Fortunes turning for Luckraft?

The first glimmer of hope has appeared for investors in George Luckraft’s Axa Framlington Monthly Income and Equity Income funds as performance begins to turn.

After two years of dire returns, the funds are moving up the rankings in the Investment Management Association (IMA)’s Equity Income sector.

Equity Income was down 6.9% over the three months to April 7, a less substantial fall than the peer group average fall of 11%, according to Financial Express. Over one month, the fund delivered a positive return of 10.8% against the sector’s 9.5%.

Meanwhile, over three months Monthly Income fell 12.65% against the sector’s 9.81% fall and the FTSE All Share’s 10.26% fall. Although the fund is still lagging the benchmark and the peer group, the difference s less pronounced than in three-year numbers.

Over the three years to April 7, the fund plunged 54.55% compared with the sector’s 26.7% fall and the benchmark’s 32.08% fall.

In a conference call for investors today, Luckraft said that major changes to the funds have included increasing oil and gas exposure and a greater weighting towards large cap stocks.

In the past, Luckraft has blamed disappointing performance on his small-cap holdings, as well as exposure to banks and mining stocks. He has a continuing underweight to banks, only holding HSBC and Standard Chartered because of the dearth of dividends in the sector.

Between December 31, 2006, and February 28, 2009, he doubled his oil and gas position in both funds, taking it to 14% in Equity Income and 13.4% in Monthly Income. Oil giants such as BP and Shell are paying dividends above 9% and are paying out in dollars, which is important when sterling is falling against the dollar.

“With yields getting above 9%, [the sector] is impossible to ignore,” the manager said. “I am being pragmatic. I recognise the amount of yield from these stocks and the amount of yield that represents in the market.”

The large cap exposure has come from existing holdings upgrading to become large-cap stocks, rather than a conscious decision by Luckraft to move up the market-cap spectrum.

Luckraft said: “Valuations at the start of the year were at such levels they were discounting a 1930s-style depression. When you have stocks on P/Es of three and yields of 10, it is not surprising you get some recovery from that.”


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