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View the article online at http://citywire.co.uk/wealth-manager/article/a646759

Equity income: home is where the heart is?

by Dylan Lobo on Dec 27, 2012 at 07:00

‘In this way, many UK equity income funds benefit from global developments rather than UK-specific factors. For example, pharmaceutical companies – a favourite for many UK equity income funds – are benefiting from growing demand for their products and services in the emerging markets.’

It is statistics and anecdotal evidence like this that makes it difficult to abandon a market that has been so rewarding over the years.

All in the mind

Ultimately, however, it could be simple human nature that ensures UK funds remain prominent features on investors’ buy lists.

Seager-Scott says: ‘I think the reason they [UK equity income funds] have remained – and will continue to remain – popular is that for most developed economies, the majority of investors are likely to exhibit a natural home bias when it comes to equities. I think part of this is for pure investment reasons, and some of it is psychology.

‘From an investment point of view, investing overseas introduces an additional risk factor in the form of currency to a portfolio. It also keeps the manager’s investment universe limited to a relatively manageable size – after all, it is easier to have a reasonable working knowledge of most of the income-yielding companies in the UK than in the whole world.

‘There may also be a psychological element, where investors naturally feel more comfortable investing in a fund where they are familiar with a number of the stocks, being UK companies, than those that are overseas.’

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