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EdenTree Higher Income - value investing

Heather Ferguson | Wed 09 March 2016

Investments can go down as well as up so there is always a danger that you could get back less than you invest. Nothing here is personalised advice, if unsure you should seek advice.

Our view

Robin Hepworth has proven himself as an exceptional manager and we rate him highly. Moving in and out of different asset classes is exceptionally difficult to time right and usually leads to poor results, yet Robin Hepworth has proven an exception to this rule. As an experienced asset allocator his balanced and diversified approach could result in attractive returns for investors over the long term, while being less volatile than a portfolio focused only on shares. The fund also has a low ongoing charge of 0.45%, the Vantage charge of up to 0.45% per annum also applies. The fund remains on the Wealth 150+ list of our favourite funds across the major sectors.


Robin Hepworth, manager of the EdenTree Higher Income Fund, is a value investor. While over the long run a value strategy has historically outperformed one focused on growth, since the 2008 financial crisis the tables have turned. Since launch in November 1994, the fund has returned 477.4%* compared with 326.7% for the FTSE All Share Index and 220.8% for the IA Mixed Investment 40-85% Shares sector. However, the fund has underperformed the sector since September 2014. Past performance is not a guide to future returns.

Annual percentage growth
March 11 -
March 12
March 12 -
March 13
March 13 -
March 14
March 14 -
March 15
March 15 -
March 16
EdenTree Higher Income 4.03% 16.55% 4.91% 9.63% -5.94%
IA Mixed Investment 40-85% Shares 0.82% 10.73% 7.2% 8.62% -3.77%

Source: Lipper IM to *01/03/2016. Past performance is not a guide to future returns.

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Exposure to Asian equities dragged on returns, as did almost 5% invested in oil majors BP and Royal Dutch Shell. However, Robin Hepworth's value bias has proven its biggest headwind. Although growth companies have outperformed their value counterparts since early 2008, the divergence has become more pronounced over the past 18 months. He is happy to retain his bias to value stocks as he expects them to outperform growth companies over the long term.

Growth investors seek companies which are expected to deliver above-average growth as measured by metrics such as earnings or cash flow.

Value investors, on the other hand, seek lowly-valued companies that may have fallen on hard times, but where the investor sees improvement on the horizon.

Current positioning

The attractive income currently available from equities relative to bonds has led the manager to increase exposure to around 67% of the fund. GlaxoSmithKline is an example of a current holding. The company has fallen out of favour with investors due to concern over the corruption scandal in China and one of its key drugs falling out of patent. There is also concern over the sustainability of the dividend. However, the manager is positive on the company's outlook, which includes opportunities in HIV and Shingles vaccines and he believes investors' dividend concerns are unjustified as they overlook the long-term potential.

For the fund's bond exposure, the manager favours higher-risk high-yielding corporate bonds. Around half the bond exposure is in unrated bonds, which currently includes a large weighting to building society bonds. These bonds performed significantly better than bank bonds during the financial crisis and the manager is confident of their continued strength because of their high customer satisfaction rates.

Income record

Robin Hepworth aims to produce a growing income alongside capital growth. The fund currently yields an attractive 4.86% (variable and not guaranteed). £10,000 invested at launch has provided £16,220 of income and the capital value would now be worth £24,200, or £59,036 if the income had been reinvested. Although past performance is not a guide to future returns and investors could get back less than they invest.

Please note the fund's charges can be taken from capital, which can increase the yield but reduces the potential for capital growth. The manager has the flexibility to invest in higher-risk emerging markets.

Find out more about this fund including how to invest

Please read the key features/key investor information document in addition to the information above.

Important information - Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice. No news or research item is a personal recommendation to deal.


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