Disclaimer
This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary.
Income concentration in the UK market is a real problem. In fact, we would argue that one of the key benefits of going active for income is the ability a manager has to diversify the sources of dividends and, thereby, the risks to an income stream. The average trust in the UK equity income sector pays approximately 4.5%, compared to the 3.6% of the FTSE All Share Index. In addition to this yield pick-up, our analysis shows that the dividends in the investment trust sector are more diversified than they are in the UK market and there are a number of trusts with highly-differentiated approaches, which means they can offer good diversification to the more traditional income funds.
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