The Chelverton’s fund’s 27 per cent growth over the past 12 months is better than some of its small cap peers, but lower than in previous years, for example in 2013/14 and 2012/13, when the fund made returns of 58.2 per cent and 35.2 per cent, respectively.
It has fully recovered from a 2014-15 performance lull, in which the fund shed 0.6 per cent due to expectations of an interest rate rise, falling commodity prices and geopolitical risks.
The fund’s top holding: Nottingham-based fantasy model company, Games Workshop Group, reported a considerable rise in sales and profits in the months between 28 November 2016 and 15 January 2017 – a trend the company says has continued. In the six months to 27 November 2016, the company also reported a 28 per cent increase in sales (£70.9m).
Success also followed for its second largest holding, Belvoir Lettings, over the past year. The property company, which is now the largest in the UK following the acquisition of lettings company Northwood, reported a £10m profit to the year to 31 December 2016.
Looking ahead
While a few of the elements that contributed to complicating growth within the UK equity market over the past few years have either subsided or changed, there remain risks on the horizon for dividend investors.
The US Federal Reserve’s quickening series of rate hikes, for example, may well see some of the top funds slip down a few places because of how so-called ‘bond proxy’ shares – stable, high-quality, income-paying companies such as consumer staples firms – are affected by higher rates of interest at home and abroad.
Similarly, the complex negotiations that are expected to follow once Article 50 is triggered may present some issues for UK equities, although triggering Article 50 itself is not forecast to have a significant impact on the sector.
Changes to the IA’s equity income sector yield requirement rules could level the playing field slightly, should more and more previously booted funds move back into the UK equity sector, but the new 100 per cent requirement has not met with universal acclaim. The Neptune Income Fund, for example, has said it remains committed to achieving a 110 per cent target yield for fear of deviating from its income focus.
Meanwhile, Mr Woodford has opted for his latest income fund to sit outside the sector. Nonetheless, it seems unlikely that advisers’ love affair with equity income will disappear any time soon.
