The second multi-manager remaining in the sector is Hargreaves Lansdown. Three funds of funds – Credit Suisse MM UK income, IFSL Lawrence House UK equity and Fidelity multi-manager equity income portfolio – have moved into the new UK equity income and growth sector which has less stringent yield requirements than the UK equity income sector.
The yield target for the UK equity income sector is 110 per cent of the yield of the FTSE All Share index but 90 per cent for the new sector.
Rather than bringing a lack of competition in the UK equity income sector, T Bailey believes advisers have a clearer choice. It says running an equity income fund has always been challenging, regardless of how many funds are in the sector, and it will continue to meet that challenge by maintaining yields well above the target. T Bailey equity income yielded 139 per cent of the FTSE All Share yield at December 31, 2008 – 6.22 per cent against the All Share’s 4.49 per cent.
Chief executive and fund manager Jason Britton says it puts a lot of focus on yield and its fund is well placed to grow distribution in future.
He says: “We do not just buy out and out yield, we buy funds that are now in the new sector. We have had a difficult couple of years but are happy with the position of our fund. We are spending more time looking at yield and distribution and at managers. There are lots of distribution cuts coming and we are looking for more robust dividends. We do not feel there is much difference between the UK income and growth and the UK all companies sectors. We think it is going to confuse people.”