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Neptune to report dividend concentration risk on funds

Neptune Investment Management to disclose the extent its equity income funds rely on dividends from top 10 biggest stocks.

 
Neptune to report dividend concentration risk on funds

Neptune Investment Management is to follow up its 2015 decision to publicise the active share - or extent of active bets - in its portfolios by disclosing the level of dividend concentration risk in its equity income funds.

The company will introduce a Dividend Risk measure, reporting on the proportion of yield derived from top 10 positions, to its Neptune Income , Neptune Quarterly Income , Neptune US Income and Neptune Global Income funds .

‘We believe this is a particularly important issue in the UK income market, where dividend risk is at elevated levels at the moment,’ said Neptune founder and manager of its Income fund Robin Geffen (pictured).

‘It is well-known that UK dividends are highly concentrated, with around 38% of all dividends coming from just five companies.

‘Data from Morningstar shows that around a third of UK equity income funds rely on their top-10 to deliver more than 50% of their yield. This is particularly topical at the moment given that dividend cover in the UK is at its lowest level since the height of the financial crisis.

‘These are staggering numbers and we believe they show how, inadvertently, a number of UK equity income funds are relying on very few stocks to deliver a very large part of their yield,’ he said.

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