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View the article online at http://citywire.co.uk/wealth-manager/article/a724323

How Mark Slater is bouncing back - and why his income fund is flying

by David Campbell on Dec 13, 2013 at 07:18

‘We held stocks, such as data centre manager CSF, where things have just been difficult for a long time, City of London Investment Group, Goldplat, Asian Plantations – those all cost us.

‘Over the last few years we have divested a lot of those. But mostly we were affected by a period when cyclicals were the only game
in town.’

A bright spot has been the company’s Income fund . Since launch in September the fund has returned almost 58% versus the IMA UK Equity Income sector peer average of 47%. That compares to 37% by Slater Growth and 16.1% by the Slater Recovery funds respectively.

While the fund has benefited from a run-up in prices, the mandate still yields 3.75% on a historic basis – and Slater is confident of this rising to plus 4% in the not too distant future.

The large disparities between the mandates is down to how the portfolio was designed ‘in response to what the people we were talking to ahead of the launch said they wanted – it is much more of a balanced mandate.'  

Income winners

While the top 10 holdings of the other two funds rarely feature companies familiar from the pages of the Sunday business supplements, a third of the income fund is devoted to FTSE 100 yield stocks, with a further third in the FTSE 250 and the balance lower down the market cap.

That is further subdivided into three stylistic categories.

‘We have growth companies, all offering a yield but probably less dynamic. Then we have lower price-to-earnings (P/E) growth stocks, which has some overlap with growth stocks like Cineworld, Photo-Me International and Marston’s Brewers. Then we have the dividend stalwarts, which offer good potential for steady earnings upgrades.’

The large cap section features the names you would expect – Vodafone, GlaxoSmithKline and Go Ahead. Thematically these are linked to a large holding in Reits, including the now rehabilitated Hansteen.

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