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Trojan Income grows and preserves

Trojan Income mitigates downside, provides good long-term returns and is surprisingly cheap to run
March 5, 2012

Equity income is more a defensive sector than a safe haven, but equity income funds can mitigate downside while continuing to pay dividends in falling markets.

132.85p

The fund that fell the least in 2008 was Trojan Income, which ended the year down around 12 per cent compared with a fall of more than 30 per cent by the FTSE All-Share. And that was the only year in the past five in which Trojan Income made a negative return, in line with its objective of delivering consistent absolute returns and a progressive stream of income.

It also aims for above-average income with the potential for capital growth in the medium term and has delivered strong cumulative returns, making it the top performing equity income fund over one and five years.

The fund's managers aim not to lose money and take a long-term approach to investing, usually holding shares between three and five years, without reference to benchmarks. They favour sustainable business franchises and examine long-term performance, allocation of capital, return on investment, cash flow and balance sheets. They often make investment decisions against the consensus, seeking companies with a share price that significantly understates the long-term potential.

Because of the fund's defensive stance, when markets rally it may get left behind, as we saw in 2009. Trojan Income is also not the highest yielding fund in its sector, but has raised its dividend every year since launch, including a 3.1 per cent rise over the past year.

Its total expense ratio of 1.07 per cent is more like that of investment trusts than open-ended funds, which typically charge around 1.5 to 1.6 per cent.

TROY TROJAN INCOME O Inc (GB00B01BNW49)

PRICE132.85pMEAN RETURN16.19%
IMA SECTORUK Equity IncomeSHARPE RATIO1.6
FUND TYPE Open-ended investment company1-YEAR PERFORMANCE12.60%
FUND SIZE£462.2m3-YEAR ANNUALISED PERFORMANCE17.08%
No OF HOLDINGS46*5-YEAR ANNUALISED PERFORMANCE6.20%
SET UP DATE30-Sep-04TOTAL EXPENSE RATIO1.07%
MANAGER START DATE30-Sep-04YIELD4.81%
TURNOVER19.60%MINIMUM INVESTMENT£1,000
STANDARD DEVIATION9.70%MORE DETAILSwww.taml.co.uk

Source: Morningstar, *Troy Asset Management

Performance data as at 5 March 2012

Top ten holdings as at 31 January 2012

Imperial Tobacco4.4
Royal Dutch Shell3.5
BP3.4
Associated British Foods3.2
National Grid3.1
Vodafone3.1
Compass Group3.1
HSBC Holdings3
Severn Trent3
Scottish & Southern Energy2.8

Sector breakdown

Consumer goods23
Financials16
Utilities14.00
Consumer Services10
Oil & Gas8
Industrials5
Healthcare4
Technology4
Telecommunications4
Basic Materials2
Cash10