There is a problem with the UK’s core crop of income funds. UK equity income trusts are highly concentrated in a few big names, which we think is a potential cause for concern for income-seeking investors. It is also a good reason to diversify one’s sources of income.
This concentration is particularly worrying when you consider that many of the largest yielders in the index have an uncertain future, and there are question marks over the sustainability of their dividends. Just eight companies make up over the 50% of the yield of the FTSE 100, according to Bloomberg figures, and the likes of Shell, BP and GlaxoSmithKline feature 17, 14 and ten times in the top five holdings across the 24 trusts in the UK Equity Income sector.
As we discussed in our recent article, Rebel Rebel, the AIC has overhauled its sectors, aiming to make it easier for investors to identify and compare appropriate investments. However, we believe they have overlooked a potentially interesting group of trusts that could more properly be considered a sector and which might help mitigate this problem: small cap equity income.
Kepler Trust Intelligence provides research and information for professional and private investors. In order to ensure that we provide you with the right kind of content, and to ensure that the content we provide is compliant, you need to tell us what type of investor you are.Read the full article
We examine the relationship between how much a fund costs and how it performs, with surprising results...
In the second part of our active management series, we assess the most active managers across the major closed-ended equity sectors…
In a bid to keep up with investment trusts, new rules are coming into effect requiring independent directors for OEICs. Will these changes help prevent another Woodford?
Invesco's Ciaran Mallon thinks the referendum has created a clear opportunity for UK investors...