Artemis Income - reaping the benefits of technology
Dominic Rowles | Tue 24 July 2018
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- Run by an experienced investor
- Many investments stand to benefit from technological innovation
- Fund could be a great addition to many portfolios
Our View
We've always been fans of equity income investing.
The idea is simple. Own shares in strong, well-managed companies that can grow their earnings over time. These earnings will often be returned to shareholders as a rising dividend, and their share prices could rise too.
The Artemis Income Fund is managed by one of our favourite investors, Adrian Frost. He has a long and successful track record. We put this down to his ability to invest in areas of the stock market that have gone on to perform well and to select companies with strong prospects. He has the support of a well-resourced UK equity income team, including co-manager Nick Shenton.
The fund currently yields 3.62%. That’s attractive given the low level of interest rates paid on cash. But dividends are variable and not guaranteed, so should not be seen as an indicator of future returns. The fund’s charges can be taken from capital which increases its yield but reduces the potential for long-term capital growth.
We think this fund could be a great addition to an income-focused portfolio. Or it could help diversify a portfolio focused on long-term growth. That’s why it’s on the Wealth 150+ list of our favourite funds.
Where is the fund invested?
Mining and oil & gas companies make up around a fifth of the UK stock market. They performed well over the past year as rising commodity prices increased their profits.
The fund doesn't invest much in these areas, so it missed out on some of the gains. But Adrian Frost thinks these companies are too volatile. He favours those he thinks can generate a steadier and growing income.
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| June 2013 -
June 2014 |
June 2014 -
June 2015 |
June 2015 -
June 2016 |
June 2016 -
June 2017 |
June 2017 -
June 2018 | |
| Artemis Income | 11.6% | 5.8% | -0.7% | 19.3% | 8.2% |
| FTSE All-Share | 13.1% | 2.6% | 2.2% | 18.1% | 9.0% |
Past performance is not a guide to the future. Source: Lipper IM to 30/06/2018.
The manager prefers companies that use technology to improve their products and services, while reducing costs.
An example is travel agent TUI. Its shares have been held in the fund for a number of years. The company has used technology to overhaul some of its internal processes, saving time and money.
The fund mostly invests in the UK, but the manager can invest up to 20% in overseas businesses. Shares in takeaway company Delivery Hero were bought when it listed on the German stock market last June. Its online app offers more choice and greater ease of use than many of its competitors. More and more people are ordering food this way and this could benefit the company.
Managers' outlook
UK investors have plenty to be worried about, including Brexit, political uncertainty and rising interest rates.
Adrian Frost doesn’t try to forecast the outcome of these events. He concentrates on finding companies with great prospects and the potential to pay rising dividends, whatever happens in the wider economy. This process has worked for him throughout his career and has the potential to do so in future, although there are no guarantees and the value of any investment can fall as well as rise.
Please read the Key Features/ Key Investor Information in addition to the information above.