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.
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) | |||
PRICE | 132.85p | MEAN RETURN | 16.19% |
IMA SECTOR | UK Equity Income | SHARPE RATIO | 1.6 |
FUND TYPE | Open-ended investment company | 1-YEAR PERFORMANCE | 12.60% |
FUND SIZE | £462.2m | 3-YEAR ANNUALISED PERFORMANCE | 17.08% |
No OF HOLDINGS | 46* | 5-YEAR ANNUALISED PERFORMANCE | 6.20% |
SET UP DATE | 30-Sep-04 | TOTAL EXPENSE RATIO | 1.07% |
MANAGER START DATE | 30-Sep-04 | YIELD | 4.81% |
TURNOVER | 19.60% | MINIMUM INVESTMENT | £1,000 |
STANDARD DEVIATION | 9.70% | MORE DETAILS | www.taml.co.uk |
Source: Morningstar, *Troy Asset Management
Performance data as at 5 March 2012
Top ten holdings as at 31 January 2012
Imperial Tobacco | 4.4 |
Royal Dutch Shell | 3.5 |
BP | 3.4 |
Associated British Foods | 3.2 |
National Grid | 3.1 |
Vodafone | 3.1 |
Compass Group | 3.1 |
HSBC Holdings | 3 |
Severn Trent | 3 |
Scottish & Southern Energy | 2.8 |
Sector breakdown
Consumer goods | 23 |
Financials | 16 |
Utilities | 14.00 |
Consumer Services | 10 |
Oil & Gas | 8 |
Industrials | 5 |
Healthcare | 4 |
Technology | 4 |
Telecommunications | 4 |
Basic Materials | 2 |
Cash | 10 |