Vodafone Hits Ethical, Equity-Income Funds

See which funds have the most exposure to Vodafone.

Christopher J. Traulsen, CFA 22 July, 2008 | 6:38PM
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Vodafone (link will open in a new window) dropped sharply on Tuesday after predicting that its revenue for the year ending March 2009 would come in at the low-end of expectations. Even so, the telecoms giant said cost-cutting measures would enable it to meet profit forecasts.

Investors were clearly not appeased by the latter, however. Indeed, Morningstar's own Vodafone analyst noted that pressure on revenues from a slowing Spanish economy was greater than expected, and that the company might not be as defensive as previously assumed. The shares ended Tuesday down 20.25p o

r 13.57%. The impact is likely to be heavily felt among ethical funds and equity income funds in the UK, many of which favour Vodafone. The funds that have disclosed portfolios as of 31 March or more recently, and had the largest weights in Vodafone at the time are listed in the table below (note that the funds may have changed their Vodafone stakes prior to today's announcement).

A large stake in Vodafone doesn't necessarily mean something is amiss with a fund's strategy. Indeed, we'd be concerned if managers focussed too much on near-term news, and Vodafone could easily bounce back relatively quickly. However, it shows why investors need to think about their exposures carefully as they build their portfolios. If for example, you were to pair an ethical fund with one of the diversified offerings below for your UK equity allocation, you might have far more exposure to a handful of companies such as Vodafone than you would expect. To guard against this, you can use our Instant X-Ray tool to check for stock overlap.

Ethical Funds with Large Vodafone Exposures
Fund Morningstar
Category
% Assets in
Vodafone
Portfolio
Date
L&G Ethical UK Large-Cap Blend Equity 9.89 30/06/08
Prudential Ethical UK Large-Cap Value Equity 9.66 30/06/08
Scottish Widows Ethical UK Large-Cap Blend Equity 9.01 30/06/08
Old Mutual Ethical UK Large-Cap Value Equity 8.46 30/06/08
Scottish Widows Environmental UK Large-Cap Blend Equity 8.16 30/06/08
Norwich UK Ethical UK Mid-Cap Equity 7.84 31/05/08
Norwich Sust. Future UK Gr. UK Mid-Cap Equity 6.81 31/05/08
F&C UK Ethical UK Large-Cap Blend Equity 6.78 31/05/08
Aegon Ethical Equity UK Mid-Cap Equity 6.65 30/06/08

Diversified Funds with Large Vodafone Exposures
Fund Morningstar
Category
% Assets in
Vodafone
Portfolio
Date
Baring Equity Income UK Large-Cap Value Equity 8.95 31/05/08
Prudential Newton Hi-Inc UK Large-Cap Value Equity 8.89 30/06/08
BlackRock UK Income UK Large-Cap Value Equity 8.86 31/03/08
Newton Growth UK Large-Cap Growth Equity 8.82 31/03/08
Newton Higher Income UK Large-Cap Value Equity 8.48 31/03/08
Jupiter UK Special Sits UK Large-Cap Blend Equity 8.33 31/03/08
Premier Castlefield Monthly Eq UK Mid-Cap Equity 8.03 30/06/08
Insight Inv. Equity High Income UK Large-Cap Value Equity 7.97 30/06/08
Newton Income UK Large-Cap Blend Equity 7.61 31/03/08
ResolutionAsset Higher Yield UK Large-Cap Value Equity 7.41 30/06/08
SG UK Growth UK Large-Cap Value Equity 7.27 30/06/08
Lincoln Growth Trust UK Large-Cap Blend Equity 7.25 30/04/08
Lazard UK Alpha UK Large-Cap Blend Equity 6.99 31/03/08
Cazenove UK Equity Income UK Large-Cap Blend Equity 6.91 31/05/08
Majedie Asset UK Equity UK Large-Cap Blend Equity 6.79 30/06/08
ResolutionAsset UK Focus UK Large-Cap Blend Equity 6.79 30/04/08
Cazenove UK Opportunities UK Large-Cap Blend Equity 6.76 30/06/08
Lazard UK Income UK Large-Cap Value Equity 6.74 31/03/08
F&C UK Equity Income UK Large-Cap Value Equity 6.70 31/05/08
Threadneedle UK Gr&Inc UK Large-Cap Blend Equity 6.69 31/05/08
M&G Dividend UK Large-Cap Value Equity 6.64 30/04/08
Norwich UK Equity Income UK Large-Cap Value Equity 6.63 30/06/08

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Christopher J. Traulsen, CFA  is director of fund research, Europe and Asia, Morningstar.

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