Overlap Found in Top UK Equity Income Funds
A recent analysis has shed light on the significant overlap in holdings among some of the largest equity income funds While investors often diversify their portfolios across multiple funds, the findings suggest that this strategy may not always achieve the desired level of diversification, especially within the UK Equity Income sector.
Common Holdings Among Major Funds:
The IA UK Equity Income sector boasts 10 funds with assets exceeding £1 billion. Notably, the Vanguard FTSE UK Equity Income Index fund, a passive tracker, was compared against the top 10 holdings of the other nine funds.
Overlapping Stocks:
Among the funds, Halifax UK Equity Income emerged with the highest overlap, sharing seven of the Vanguard tracker's top 10 holdings. Close behind are BNY Mellon UK Income and Man GLG Income, each with six overlapping stocks.
Notable Exceptions:
Royal London UK Equity Income shares half of its top 10 stocks with the FTSE UK Equity Income Index, while four holdings overlap between Jupiter UK Income and Schroder Income. Conversely, funds like Artemis Income, CT UK Equity Income, and JOHCM UK Equity Income exhibit lesser overlap.
Top Holdings:
The analysis identified BP as the most popular stock among the funds, with CT UK Equity Income being the only exception. Shell and GSK are owned by seven of the 10 funds, followed by six funds holding HSBC and five with Unilever.
Common Conviction Positions:
Beyond the index, several funds showcase high-confidence positions that overlap with each other. Notable examples include Aviva, Barclays, and Imperial Brands, held by four of the funds, while AstraZeneca and Standard Chartered feature in three funds each.
