SECTOR PROFILE
Old faithful
Investors in UK equities have experienced fluctuating fortunes so far in 2022 . While the IA UK All Companies sector is down 9.4 % and IA UK Smaller Companies has fallen even further , with losses of 23.3 %, the IA UK Equity Income sector has held up relatively well , down just 2.9 %. Given its natural bias to some of the best-performing areas this year such as commodities and energy , it is unsurprising that UK equity income strategies have done better than most of their peers . Unloved by investors for much of the past decade as value fell out of favour , they now appear reasonably well placed for today ’ s economic backdrop and a lengthy period of double-digit inflation . Yet the dividend stalwarts of the
FTSE find it difficult to shake the “ old economy ” label , especially when compared with more forward-facing markets , such as the US . Despite its recent strong performance in relative terms , does the IA UK Equity Income sector represent a compelling longterm option for any investors other than those relying on dividends for income ?
Back to basics Despite its unpopularity , Chris Metcalfe , chief investment officer at IBOSS , has been positive about the UK equity income sector for some time . “ It needs to be remembered that , in general terms , the UK has been an underperformer for many years , but on a relative basis it should do well in an inflationary environment ,” he says . Metcalfe uses two funds in the sector ,
Janus Henderson UK Responsible Income and
Man GLG Income . While both have some commodities exposure , their most significant overweight is to financials . “ However , we still believe there is considerable value in the commodity complex , much of which has suffered from woeful underinvestment over many years ,” he says . “ This is leading
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