Asia and the US are throwing up more opportunities for income investors than the UK stock market, according to global fund managers - and even more so as uncertainty over BP's dividend continues.
Fears that the oil company's 2010 payout will be suspended because of the Gulf of Mexico oil spill have caused problems for managers of UK equity income funds. This is because BP's dividend accounts for as much as 15 per cent of the total income from the FTSE 100.
Bestinvest, the financial adviser, has worked out that BP is the largest holding in 40 out of 86 UK income funds. Another 23 also have a holding in BP. In some funds, the holding is approaching 10 per cent.
Tim Cockerill, head of research with Ashcourt Rowan Asset management, believes it is time for UK investors to look elsewhere for their income. "After years and years of being restricted to the UK, there is now opportunity elsewhere - which provides diversification and the chance to have exposure to some exciting areas such as Asia and emerging markets."
And UK fund houses are keen to roll out new varieties of income funds. Just this week, Aberdeen unveiled plans to add a Latin American income fund, which will invest in a mix of income stocks and sovereign bonds. The first of its kind to list in the UK, it is expected to yield 4.25 per cent.
However, while more managers are now offering global equity income funds, there is still some reluctance to buy on the part of UK investors. More than £49bn in assets is still held in UK equity income funds, according to recent figures from the Investment Management Association, while just £1.8bn is invested in global equity income funds.
A longer version of this article appeared in FTMoney, part of the WeekendFT. You can read it, and more articles about personal finance and investing, at www.ft.com/money.
