One UK equity income fund seems to have captured managers’ imagination of late.
Our database shows a new favourite has entered the fray: Evenlode Income, run by Hugh Yarrow and his colleagues in the Cotswolds has become the single most popular UK equity income fund in our database.
The £3.4bn offering is now held by eight of the DFMs we cover, overtaking CT UK Equity Income with five and Artemis Income with seven.
Evenlode has amassed three new buyers so far in 2023, while clocking just one sale.
Analytics firm Relx, consumer goods giant Unilever, and booze flogger Diageo comprise the top three holdings in its portfolio.
That exposure to bond proxy type stocks certainly would be expected to do well in a world where bond yields and interest rates drift down, and we wonder if this is the thinking of the recent buyers of this fund.
Performance has been strong in total return terms, the fund has achieved first quartile returns over five years, notching a 34 per cent gain while the IA UK All Companies sector returned 15 per cent in the same time period.
Its dividend leaves a lot to be desired, however. Evenlode Income is yielding a meagre 2.8 per cent – nearly 170 basis points lower than the UK 10-year gilt.
For context the highest yielding fund in the UK equity income sector is Premier Miton Optimum Income which yields 7.7 per cent.
But then Evenlode Income is a slightly idiosyncratic UK equity income fund in that it hasn’t been a member of the UK Equity Income sector since it was thrown out in 2016 after failing to meet its yield threshold and it has less of a focus on yield and more of a focus on performance.
Indeed had it been in the UK Equity Income sector it would have been among the top performers in the sector over the past five years.
Threadneedle’s popularity has waned somewhat, with one house swapping Threadneedle directly for Evenlode, though they have sacrificed a slightly higher dividend of 3.3 per cent in the process.
Threadneedle changed manager at the end of 2022, which may account for some of the recent caution among allocators.
Joseph Wilkins is a freelance journalist
