Bestinvest says
George Luckraft pioneered a “barbell” approach to UK Equity Income investing in the 1990s, combining traditional high yielding equities with lower yielding growth stocks to target a yield of 110% of that of the FTSE All Share. However, this inclusion of the latter, often featuring illiquid small cap stocks, means the fund may prove from time to time to be extremely volatile, relative to the typical Equity Income fund. Therefore this fund should not be considered as a core fund for income.
The fund aims to combine a regular income with the potential for long term capital growth. The approach is similar to that of the AXA Framlington Equity Income fund but targets a higher yield, 125% of that produced by the FTSE All Share, through the inclusion of fixed interest securities.
The manager uses a "barbell" strategy, splitting the portfolio into three parts:
- High quality stocks with attractive, sustainable yields;
- Fixed income and convertibles (around 15% of the portfolio);
- Equities with attractive growth characteristics but little or low yield.
This inclusion of the latter, often mid and small cap stocks, means the fund can still prove successful in a period where traditional 'value' stocks are out of favour. Weightings between the styles are varied according to market conditions. Stock research is primarily bottom-up, using company meetings and traditional valuation analysis, but the manager also looks at macroeconomic factors that may affect the portfolio.