Fund of the week: conservatism will pay off
One equity income fund that looks good value is Standard Life’s Equity Income Trust, which was taken over in November 2005 by Karen Robertson, an economics graduate from Strathclyde University. Robertson is A-rated by Citywire, having beaten the average fund manager’s performance by nearly 9% over the past three years.
She also runs the investment trust’s sister fund, Standard Life UK Equity High Income, which has returned around 70% in the past three years, against the 58% sector average. The advantage of buying into the trust instead of the fund is that you get broadly the same performance (“around 90% of their holdings are the same”, says Money Observer), but for half the management fee. The fund holds in the region of 70 FTSE 350 stocks with a large chunk in oil majors, such as BP and Royal Dutch Shell, and miners like Anglo American.
The fund trades at a near-10% discount to its underlying net asset value. Performance over the last two years has been hampered by a decision to pull out of some frothy mid-cap stocks – pumped up on private-equity bid fever – earlier than competitors. But this conservative approach, which favours reliable large caps, should pay off as market conditions turn and a lack of cheap debt sees merger and acquisition activity subside.
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Equity Income Trust top ten holdings
Name of holding, % of assets
BP, 6.4%
Royal Bank of Scotland Group, 4.5%
GlaxoSmithKline, 4.4%
Vodafone Group, 4.4%
HSBC Holdings, 3.7%
Royal Dutch Shell, 3.7%
Anglo American, 3.1%
HBOS, 3.1%
Barclays, 2.5%
Lloyds TSB Group, 2.1%
