Bestinvest says
Fund manager duo Nick Kirrage and and Kevin Murphy appear to be promising fund managers and are already rated by Bestinvest for their Schroder Income Maximiser fund. However, Schroder Income lacks that fund's distinguishing feature, its high yield, so we have higher conviction in other UK Equity Income funds at present.
The fund aims to provide a growing income by investing primarily in large and medium size UK equities. The managers focus on shares which trade at a low valuation compared to the company's assets or profit growth prospects. These shares tend to carry a high yield – the managers believe that high yielding stocks tend to outperform in the long term due to market inefficiencies. However, to achieve a growing level of income, the managers invest in shares they believe will be able to continue to pay out a high level of income through growing profits. The process starts with a quantitative screen which looks for stocks that have underperformed the FTSE All Share over three to five years; that appear attractively valued; and have operating returns substantially below their peers (i.e. companies with the potential to change this). The analysts and managers then research the resulting stocks, evaluating balance sheets and cash flows, earnings power, franchise strength, intrinsic value and downside risk.