- The managers are constantly thinking about how they could do things better
- Their decision to target dividend growth rather than high yields has benefited the fund
- Both short and long-term performance has been strong
Adrian Frost is one of the most experienced and successful UK Equity Income fund managers. He could just do what he’s always done. But Frost believes in challenging his way of doing things. He thinks that will help him avoid complacency and mistakes, and keep delivering strong long-term income and growth, though there are no guarantees.
He and co-managers Andy Marsh and Nick Shenton are always looking to learn and evolve, while staying true to their philosophy of investing for the long-term in companies they think can keep earning lots of cash.
As part of the Artemis Income fund’s evolution, a few years ago the managers decided to focus on companies they think can keep steadily growing their dividends year after year, rather than ones offering faster growing but more uncertain dividends. That’s helped them avoid some troubled businesses. But they’re still always thinking about what could potentially go wrong, and aren’t afraid to challenge each other’s ideas.
We think Frost, Marsh and Shenton make a strong team. We like their straightforward, disciplined and time-tested approach to investing. Our conviction in Frost is also particularly high, and you’ll find Artemis Income on the Wealth 50 of our favourite funds.
How’s the fund performed?
2019 was a pleasing year for the UK as a whole, and the managers delivered even greater gains. One year is a very short period to judge performance though and isn’t a guide to future returns. London Stock Exchange Group did particularly well, but there were lots of other strong performers such as warehouse developer Segro, events and publishing company Informa, and private equity investor 3i Group.
The fund’s done well over the long-term too. Since Frost took over at the beginning of 2002, it’s gained 437.3%*, compared with the FTSE All-Share’s 336% rise. Remember past performance doesn’t indicate any future performance and you could get back less than you invest.
The fund currently yields 4.2%, which is fractionally more than the FTSE All-Share’s 4.1%. Yields are variable and not guaranteed, so shouldn’t be seen as an indicator of future income. The fund’s charges can be taken from capital which increases its yield but reduces the potential for long-term capital growth.
Artemis Income performance under Adrian Frost
Past performance is not a guide to the future. Source: *Lipper IM to 31/12/2019
|Annual percentage growth|
| Dec 14 -
| Dec 15 -
| Dec 16 -
| Dec 17 -
| Dec 18 -
Past performance is not a guide to the future. Source: Lipper IM to 31/12/2019
Investing home and away
The managers recently invested in television network ITV. It produces global brands such as Love Island and I’m a Celebrity Get Me Out of Here that regularly pull in millions of viewers, has a thriving but overlooked studios business, and recently launched subscription-service Britbox, which already has 650,000 subscribers in the US.
Although they invest mostly in the UK, Frost, Marsh and Shenton can invest part of the fund in foreign companies. That’s if there are opportunities not available in the UK, or they think they can get better value overseas. That’s why they’ve invested in Ebro Foods – the world’s largest branded rice and pasta company. They think it’s an innovative business and offers a healthy income they expect to grow.
Overall though, they think the UK market is attractively valued and offers lots of opportunities. But they’re mindful that some companies are ‘cheap’ for a reason, such as they’re in decline. They prefer companies that can keep growing year after year, like information and analytics provider RELX. The business is bearing fruit from investments made several years ago and has planned improvements for several years more.