The outlook has improved for dividend paying equities in general, and the UK in particular, but now is not the time to have a vast exposure to the latter, according to John Stopford, who runs the £1.4bn Ninety One Diversified Income fund.
He said: “We thought coming into 2022 that markets would be tougher than they were in 2021, the benign conditions, particularly in monetary policy terms, were subsiding and economic growth was coming off its peak, so it's not surprising there has been volatility. Markets were at record highs, so a sell-off was probably on the cards. But what has changed is that income paying stocks have started to do better as the market values earnings today ahead of earnings in the future.”
He says this has created many more opportunities for income investors, even if the economic outlook has darkened since the start of the year.
Stopford said despite this, “It's not right to call time on the outperformance of value yet.”
None of the funds top ten holdings, which are all bonds, are UK assets, while 9 per cent of the overall portfolios is UK.
Stopford said: “We don’t do tobacco or oil stocks, which means we don’t have an outsize allocation to the UK, but we think it is not the right time to have an outsize allocation.
"We aren’t that interested in some of the alternative income assets listed on the UK market, for example music royalty funds. Our view is we have no idea what the underlying value of those is.”
david.thorpe@ft.com
