The Standard Life UK Equity High Income Fund has been removed from the Wealth 150 list of our favourite funds for new investment. Karen Robertson took over management of the fund in July 1995. Following changes to portfolio construction in 1999, the fund performed reasonably well under her stewardship; however since 2008 performance has been disappointing.
Karen Robertson attributes the fund's recent poor performance to three key periods. As the financial crisis unfolded in 2008, the fund had significant exposure to banks which proved costly. In 2010, performance was impacted by BP, a large holding, whose shares fell in value following the Macondo well disaster. In 2011, market sentiment was dominated by poor economic news rather than company fundamentals. The fund was positioned in economically-sensitive sectors such as the industrials, engineers and mining areas, which underperformed relative to more defensive sectors.
This year began on a more positive note as markets rallied following Europe's bail-out package and positive news from the US. Later in the year, economically-sensitive stocks outperformed their more defensive counterparts following further encouraging news from Europe. Given the fund’s bias towards these cyclical sectors, we expected to see an improvement in performance, but the fund has failed to deliver.
According to our analysis stock selection has, overall, been a detractor from performance. The fund benefited from a period of positive stock selection following changes made in 1999, however, it has been on a downward trend more recently. The UK equity income sector is home to a number of exceptional funds, and the Wealth 150 is reserved for those in which we have the highest conviction. This fund has performed well during some periods, but overall its performance has been somewhat lacklustre, and for this reason we have removed it from the Wealth 150 list.
We would stress this is not a suggestion to sell the fund, providing it still meets your objectives. Karen Robertson has shown good periods of stock selection in the past, and we would expect the fund to enjoy periods of good performance in future. We will continue to monitor the fund for signs of a sustained improvement and if our views change we shall contact investors.