If you had invested in the IA UK Equity Income sector over the past five years, you would have lost on average nearly 1.3% per year– Terry Smith, Financial Times – 30th April 2020
With the demise, subsequent suspension and liquidation of the Woodford Equity Income fund, many of its peers have also experienced poor performance. Mark Barnett of Invesco Perpetual a former stablemate of Woodford has also had tough times, being removed from his position as portfolio manager for two investment trusts whilst still overseeing the flagship fund Invesco Perpetual High Income fund.
The sector primarily has a value orientation, investing in unloved companies that tend to have high dividend yields. With over a third of FTSE 100 companies having cut or cancelled dividend payments this year, the UK Equity Income sector is still under pressure. Quality/growth companies have led the recent rally with tech stocks being the star performers, leaving value stocks, the likes of Shell, BT, RR and M&S which were structurally challenged before the pandemic in their wake.
We have reduced our exposure to this sector in recent weeks, with the view that it will experience further headwinds in these unprecedented times.