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The Jupiter UK Income investment fund has undergone a major revamp in the last seven months, with 40 per cent of its portfolio modified.
Although it is too early to assess the merits of the impact, the result is an investment vehicle that now lives up to its name, focused on extracting a combination of income and capital returns from the UK stock market.
The overhaul was sparked by the appointment of new investment managers after Jupiter’s ‘star’ stock picker Ben Whitmore decided to jump ship – UK Income was one of several funds he ran.
The £1.3bn investment vehicle is now overseen by Adrian Gosden and Chris Morrison, who joined Jupiter from GAM Investments, bringing with them the GAM UK Equity Income fund, which has since been rebranded as Jupiter UK Multi Cap Income.
gosden says Jupiter Income in the UK is now a “core and adequate UK equity fund”. He adds: “We have done a lot in a short space of time and as a result we now own the portfolio – it is up to us to deliver for our investors.”
The reform has resulted in strong selling of the fund’s large international stock holdings (18 percent).
All UK equity funds can invest a fifth of their portfolio overseas, but the new managers want to focus on a UK stock market which they believe is seriously undervalued and has the potential to advance the market. next year.
Among the international stocks discarded are Bayer, Harley Davidson, Intel, Nokia and Ralph Lauren.
The result is a portfolio made up of 47 stocks and a fund with an attractive dividend yield of 4.5 percent and which has prospects of growing above inflation. Income is paid to investors every two years.
The fund is heavily biased towards FTSE 100 companies (75 per cent), which differentiates it from UK Multi Cap Income.
It’s also packed with companies that will be familiar to income-oriented British investors: GlaxoSmithKline, BP and tobacco stocks Imperial Brands and British American Tobacco.
Recent additions include property companies Segro (specialist in industrial units), LondonMetric, focused on urban logistics, and student accommodation provider Empiric Student Property.
Gosden describes them as “sheds and beds” type investments and believes they will perform well as interest rates continue to fall in the UK.
Gosden accepts that the undervaluation of the UK stock market stretches back beyond the Brexit vote in 2016, but believes there are three catalysts for change.
The first is the continued buying of UK-listed companies by international rivals and private equity, an indication, he says, that they believe they are buying seriously undervalued businesses that will increase in value.
Secondly, share buybacks by British companies mean that the supply of shares will continue to shrink (by 7 per cent next year), which should help push up share prices.
Finally, further rate cuts next year (Gosden believes there will be three more) should benefit the UK stock market, which responds favorably to lower interest rates.
Over the past five years, the fund has underperformed both its benchmark index (the FTSE All-Share Index) and its peer group average. The respective yields are 23.3, 30.6 and 26 percent. Current charges amount to 0.94 percent.
Fund ratings specialist FundCalibre includes Jupiter UK Multi Cap Income among its top UK equity picks.
He also likes UK equity funds run by Artemis, Rathbone and Schroders.
Highly rated UK equity investment trusts include Murray Income and The City of London.
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