During our recent review of the UK Equity Income sector, the Fidelity Income Plus Fund was highlighted for its improved performance. Michael Clark took over the fund in July 2008. The fund initially performed well during the depths of the financial crisis, but then struggled during 2009’s market recovery.
In 2009 Michael Clark held a cautious outlook and the fund was defensively positioned as a result. This led to a focus on companies with resilient earnings thought able to survive a difficult economic climate, such as those in the utilities, healthcare and telecoms sectors. These companies lagged when the market regained lost ground, as the rally was led by economically sensitive sectors such as mining and financials.
Michael Clark felt it was important to preserve the fund’s yield during a difficult time and therefore favoured what were considered dull, but worthy businesses. When market volatility heightened again recently as fears intensified over sovereign debt problems in Europe, these defensive companies were rewarded as investors flocked to businesses with predictable earnings. The fund has subsequently outperformed, albeit over a short timeframe, although past performance is not a guide to future returns. Importantly, our analysis shows that Michael Clark’s stock selection within the defensive areas of the market has also been positive and this has aided performance.
Michael Clark retains his defensive stance, and at present around half the portfolio is invested in the utilities, healthcare and telecoms sectors. Since he took over, the fund has delivered reasonable returns, despite the volatile nature of markets. We do not, however, believe the fund merits a place on the Wealth 150 list of our favourite funds in each sector at this stage, as we would first like to see the improvement in performance continued over a longer period.
The Wealth 150 represents our favourite funds in each sector for new investment. Investors in these funds will receive more frequent updates and reviews from our research team than for funds which are not on the Wealth 150.
UK Equity Income funds on the Wealth 150
Key features of the Fidelity Income Plus Fund
The value of investments can go down as well as up, this means you could get back less than you invested. Therefore all investments should be regarded with a long term view. No news or research item is a personal recommendation to deal. If you are unsure about the suitability of an investment please contact us for advice.
