We are not cabbage farmers and nor do we want to be!

Valuation and inflation risks are not new; they are permanent fixtures in an investment decision, which is why we are sticking to our knitting in how we approach income investing.

5 Feb 2021

6 minutes

Ben Needham

The fast view

  • Valuation and inflation risks are not a 2021 thing. They are permanent fixtures when making an investment decision, which is why we are sticking to our knitting in how we approach income investing, much like a farmer focuses on the crops they are most skilled at growing.
  • The UK Equity Income Fund will continue to avoid certain stocks or sectors which do not have the Quality attributes that we seek. In this piece, we touch on some of the core attributes that we look for, ranging from structural growth potential, an efficient cost base and counter-cyclical capital allocation strategies, and explain why certain stocks within the banking and other commoditised sectors still do not meet this criteria.
  • We continue to believe that UK equities look relatively attractive across the board and are cautiously optimistic of the forward return potential for the UK Equity Income Fund; many of our holdings have used the pandemic to strengthen their market positions, bringing lasting future benefits as opposed to temporary ones.

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Specific risks

All investments carry the risk of capital loss. The value of investments, and any income generated from them, can fall as well as rise and will be affected by changes in interest rates, currency fluctuations, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which the investment strategy invests. If any currency differs from the investor’s home currency, returns may increase or decrease as a result of currency fluctuations. Past performance is not a reliable indicator of future results.

Authored by

Ben Needham
Portfolio Manager

Important Information

This communication is provided for general information only should not be construed as advice.

All the information in is believed to be reliable but may be inaccurate or incomplete. The views are those of the contributor at the time of publication and do not necessary reflect those of Ninety One.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

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