I highlighted the Trojan income fund in July and since then, stockmarkets have been more volatile and the fund has coped admirably.
The volatility is driven by macroeconomic factors, particularly in the eurozone where politicians are failing to grapple with the problems. I cannot see this situation lasting much longer and either the eurozone will break up, at least in part, or the European Central Bank will come in as the buyer of last resort, as has happened in the UK and US.
Trying to forecast the market is harder than ever and the answer is not to forecast anything. Instead, concentrate on having the best fund managers looking after your money and have a decent percentage of your portfolio in cash, ready if events sudd-enly take a turn for the worse.
The trouble is that holding cash is fraught with difficulty. You pay a high price for security with rates so far behind inflation and, as banks are still repairing themselves, I sometimes wonder how safe my cash really is.
The first £85,000 in any one institution is guaranteed by the Government but the euro-zone crisis is showing us that sovereign debt itself is not as safe as once thought, turning the notion of risk on its head.
What we do know is that interest rates are not going up any time soon and rates on cash deposits are likely to remain low. So despite the volatility of the equity market, exposure to good quality, high-yielding shares looks attractive.
Trojan income, managed by Francis Brooke, is full of good quality, stable companies such as Vodafone, Shell, Glaxo-SmithKline, AstraZeneca and Tesco. These companies can be affected in the short term by macroeconomic influences but they look strong enough to withstand most problems.
As well as bigger firms, there is exposure to lesser-known companies paying generous dividends, such as Greggs, London & Stamford and AG Barr. There are also robust overseas firms such as NestlŽ and Coca Cola. Interestingly, the Troy managers are positive on the prospects for gold and they hold Newmont Mining and Newcrest Mining, two of the world’s leading gold producers.
The fund is part of Troy Asset Management, set up in 2000 with a total return approach in mind. Troy believes if you minimise losses during downturns then you will not have to regain as much when markets recover, so the funds all have capital preservation at their heart.
Given its aim of producing a high level of income, this fund tends to stay more fully invested than the Troy Trojan fund, which I have previously written about. Even so, Francis Brooke often lets cash build up to significant levels if he believes valuations will become more attractive, which is an unusual tactic for a fund in this sector.
At present, cash accounts for 7 per cent of the portfolio, though it has been well into double figures at times. This attention to deploying cash at the right moments has helped generate the fund’s excellent performance, as well as make it the least volatile in its sector since launch in 2004.
Trojan income has just the sort of portfolio that should be relatively resilient in an uncertain economic climate and with a present yield of more than 4 per cent and an unbroken record of growing income payments since launch, it is not a bad place to look for income.
The fund should therefore appeal to a wide range of income-seeking investors, as well as those with a more cautious outlook looking to remain invested in the stockmarket through good-quality, dividendpaying companies.
Mark Dampier is head of research at Hargreaves Lansdown