Old Mutual UK Equity Income manager Stephen Message has almost 35 per cent of his £81.3m fund in financials in a bid to combat the effects of US tapering.
Message has 34.9 per cent of the fund allocated to financials, mostly in the life sector. The average equity income fund has 18.9 per cent in financials.
According to FE Analytics, HSBC and Legal & General combined make up almost a tenth of the Old Mutual UK Equity Income fund.
Message says: “The broader theme under this is tapering. With a gradual rise in bond yields, typically financial companies will benefit. Companies that will not benefit will be those that were bought for falling bond yields.”
He says that while some banks’ latest results have been slightly disappointing, he has faith in the long-term impact of tapering on financial firms.
He adds: “Where I think dividends will come through is in the life sector.”
Message has just 2.4 per cent in consumer products compared with the sector average of 9.1 per cent.
Whitechurch Securities managing director Gavin Haynes says the effect of tapering on “bond proxies” is a danger for equity income managers.
He says: “We are quite impressed with Message’s fund. He offers something different from other fund managers.”