The Rathbone Income and Growth Fund’s investment strategy may seem simple, but it’s solid, says Chetan Modi on Morningstar. So much so, he says, that it makes the “fund a sound choice for core UK equity exposure”. The fund is a “steady performer”, returning 95% over the past five years against 78% for the FTSE 100.
Managed by Julian Chillingworth, who has 28 years of experience in the industry, the fund aims to achieve a steadily rising income along with some capital growth. There are no restrictions on where the fund is invested, but 85% is currently in the UK, where Chillingworth has started to switch the fund’s exposure from mid caps to large caps.
That process began in September 2005, as mid caps became more expensive than their larger rivals. The mid-cap stake has fallen from 33% to 19% of equities, while the share invested in big blue-chips has moved from 13% to 32%.
Favourites include Tesco and BP. He’s also looking at attractive propositions on the continent, where companies are cheaper and “are paying higher dividends than in the UK and US”, he tells The Independent. “We like utilities companies such as Telefonica, the Spanish telecoms operator that owns O2, and also see value in Nokia.” But he’s still being cautious – he expects more bad news from European large caps in the year ahead, after weak first-quarter results from giants such as Siemens and Philips. “People are highly jittery… We are likely to see more poor news in terms of earnings,” he tells Bloomberg.
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Rathbone Income and Growth Fund top ten holdings
Name of holding, % of assets
BAE Systems, 4.8
BP, 4.4
Aggreko, 4.0
Tesco, 4.0
Royal Dutch Shell B Ord, 3.6
Vodafone Group, 3.2
Standard Chartered, 3.2
Barclays, 3.0
Halfords Group, 3.0
National Grid, 3.0