UK Equity Income Fund

Key points

• The investment objective of the fund is to seek to generate an absolute return in all market conditions through exposure primarily to UK securities
• Investment management responsibility for the fund is with Loudwater Investment Partners Limited since 1 December 2009
• Sector: IMA UK Equity Income

Current views

For the month of August the FTSE 100 was down -0.62% compared to a -0.58% drop in the fund’s unit price (for both accumulation and income units.) For the quarter May–August, the FTSE was up 0.71% whilst the income and accumulation units of the fund were up 0.85% and 1.88% respectively.

In a month when the FTSE veered — due to low volumes and continued economic certainty — from a high of 5410.5 to a low of 5109.4 (before ending the month at 5225.2) we were satisfied, if not content, with the monthly fund performance.

There remains very little to add to our take on the macroeconomic environment — and our subsequent strategy — that we have not explored in previous updates. To summarise, we think that until there is a clearer economic outlook, the FTSE 100 looks set to continue to oscillate in the 4800-5800 region depending on how daily news items are received. Allied to our value, rather than market, driven investing philosophy, in this environment there seems to be two main ways to profit. Firstly, by foreseeing each peak and trough within the oscillation and buy and sell accordingly. Secondly, by picking stocks which pay good dividends so that during the midst of capricious capital values, investors can bank returns.

Whilst always looking for opportunities to trade over or under-valued stocks, our focus remains on the second of these options; dividend stocks. August saw an encouraging round of corporate earnings with rising dividends above inflation, so we remain convinced that our strategy remains sensible.

At a micro level, we made only one change to the make-up of the fund. We sold our holding in Aviva following excellent results that saw the share touch £4 having been hovering at the £3 mark in July. We reinvested the proceeds in existing stocks within the portfolio including Vodafone and Tesco.