Why Have UK Equity Income Funds Disappointed in 2016?

The search for a higher than average yield and sustainable dividend has seen equity income managers prefer certain sectors over others

Peter Brunt 19 July, 2016 | 8:00AM
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UK Equity Income funds have lagged the FTSE All Share in the first half of 2016. This is unlike the last six calendar years, when it has consistently outperformed the index. Why has the sector underperformed this year?

Market Capitalisation

Much of this performance difference can be attributed to the market cap profile. The Morningstar UK Equity Income category average fund, which aggregates all the holdings in each fund within the category to form a hypothetical portfolio, shows a significantly lower weighting to giant-caps and a higher weighting to mid and small-caps relative to the index.

How the FTSE 100, FTSE 250, FTSE All Share and UK Equity Income Funds Compare

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
ASI UK Income Unconstrained Eq R Acc73.46 GBP-2.77Rating
Schroder Income Acc98.89 GBP-2.95Rating

About Author

Peter Brunt  is a Senior Fund Analyst for Morningstar UK