JO Hambro UK Equity Income fund
Andy Parsons, advice team manager at The Share Centre, outlines why investors seeking income from UK equity may wish to consider the JO Hambro UK Equity Income fund.
"The (un)expected withdrawal of the dividend by BP put the UK equity income sector under intense scrutiny recently as investors looked closely to see how reliant the various funds were on this company to support their underlying yield.
"With around 10 companies accounting for approximately 60% of income from the FTSE 100 and five accounting for around 45%, investors often seek to find a fund that offers something different and that is why we like the JO Hambro fund.
"UK Equity Income funds are amongst the most popular for UK investors as they seek to add and support their current income streams. This sector contains some of the most well known and respected fund managers and JO Hambro's fund is no different.
"At the helm of this fund are Clive Beagles and James Lowen, two managers who have a combined total of over 35 years investment experience between them. Beagles is regarded as one of the best within the UK Equity income sector.
"Beagles and Lowen are able to seek out opportunities from across the entire FTSE350 spectrum, ensuring that the fund includes their very best ideas. For inclusion all companies must yield more than the FTSE All-Share index and the same strong discipline is also true for sales, such that any company that falls below the index average is sold.
"In order to support and provide a level of income, the stock selection process is key. The managers look for companies that have strong cash flows and balance sheets, alongside management strength. Investors should remember that dividends have to be paid out of a company's cash position.
"Finally, unlike one or two of its sector competitors, this fund has a self imposed cap in place that ensures the fund can grow no larger than £750m.
"In terms of performance, the fund is currently yielding 3.79% and has a proven track record, such that on both a 3 year and 5 year cumulative period, it is top quartile with returns of 9.35% and 36.65% respectively. In addition, the fund is rated ‘AA' by both Old Broad Street Research and S&P."
"As the fund features in The Share Centre's Platinum 120 range, customers wishing to invest in the JO Hambro UK Equity Income fund will not have to pay the initial charge or purchase dealing commission. Customers can also invest in the fund from as little as £10."