Inflation unexpectedly dipped this summer as food and clothing prices fell. But investors should be keeping an eye on the long-term effects even low inflation can have on investment returns, says Leonora Walters in the Investors Chronicle. One way of mitigating this is to consider investing in the equity income sector, which, suggests Adrian Lowcock at Axa Wealth, can provide a higher yield than inflation.
One option is the PFS Chelverton UK Equity Income fund. This open-ended investment company (Oeic) has done very well in recent years – trouncing the performance of the FTSE All-Share, FTSE 250 and FTSE Small Cap indices, as well as its benchmark, over one, three and five years. According to Trustnet, it hasdelivered returns of 9% over one year, 75% over three years and 127% over five years. It currently yields 4%.
The fund is run by David Horner (pictured) and David Taylor. Its remit is to pay a high and growing quarterly dividend and generate long-term capital growth by investing in small and mid-cap shares. Before a stock can join the portfolio, it has to offer a yield of 4%. The team is, of course, keen to avoid companies at risk of a dividend cut, or facing problems. So balance sheet strength is paramount, as is the potential to deliver strong cash flow and reward investors through dividend growth. If a stock’s yield falls to 2% or below, it is sold.
Recent strong performers include Clipper Logistics and printing firms 4imprint and FDM, while the team has also increased its holdings in housebuilder Bovis and defence contractor Cobham. The ongoing charge is 0.95%.
Contact: 020-7222 8989.
| PFS Chelverton top ten holdings | |
|---|---|
| Holding | % of assets |
| Phoenix Group | 2.10% |
| Galliford Try | 2.00% |
| Ashmore | 1.90% |
| Dairy Crest Group | 1.70% |
| Berkeley Group | 1.60% |
| FDM | 1.50% |
| Segro | 1.50% |
| Clipper Logistics | 1.40% |
| Kier Group | 1.40% |
| Majestic Wine | 1.40% |