Holly Black: Welcome to Morningstar, I'm Holly Black. With me is Ben Peters. He is Manager of the Evenlode Global Income Fund. Hello.
Ben Peters: Hi, Holly.
Black: So, Ben, tell me how has it been running an income fund over the past year when people have been slashing dividends left, right and centre?
Peters: Yes, well, clearly a challenging time for global business over the course of the last year. And dividends have been cut around the world, particularly in those very affected sectors. So, travel and tourism is the obvious example. But also, in the banking sector, we saw dividends cut. But actually a lot of companies did rightly conserved cash during the depths of the crisis, but as we manage to learn to cope with the effects of the pandemic, and particularly its effects on supply chains, and things like people working from home, actually companies, in large part did manage to shift their operations around, realize actually, you know, the worst wasn't going to happen. And we are starting to see dividends be reinstated now. In those sectors that are still being very affected, then that's obviously going to be a longer process. But we have certainly for the Global Income Fund seen a good resurgence in the dividends that we can connect.
Black: And in your process, you are quite valuation focused. You don't like to overpay for things. So, how are you finding that at the moment? Because some markets are looking pretty toppy?
Peters: Yes, I think managing valuation – valuation opportunity and valuation risk is something that we've been very aware of, and increasingly, as markets have continued to rise, over the course of the pandemic, which has been quite remarkable, there was this sort of the market downdraft in March and April last year. But if you ignore that, then actually markets have been very strong and strong since then as well. So, it has been something that we've had to manage closely. There is still good valuation opportunity available within the market. But I think one has to be quite selective. And we have been sort of actively selling down positions in notably look at the technology sector, and adding to sectors where they've been a bit left behind for whatever reason, not quite guessing the market excitement that perhaps they deserve. So, consumer goods is a prime example, which is now once again the biggest sector in the Global Income portfolio, but also in healthcare, media companies and some selected other industrials and service companies; you can still find good value, but I think it's important to be aware of the risks that it can pose.
Black: Well, and speaking of risks, obviously, some of the most exciting areas this year have been these meme stocks and crypto, it's getting all the headlines. Do you think a good old-fashioned equity income portfolio can compete?
Peters: Well, we're always thinking about the long-term, when we're looking at investments. And I personally and we as business think that the equity investing should be done over a period of many, many years. There has been a lot of excitement, a lot of headlines from such stocks, the GameStop phenomenon, and so on. I think for good long-term risk adjusted returns than an income-based strategy, and our strategy is based on income and income growth through time. I think that that can lead to good outcomes, perhaps over a longer period of time, than some of these stocks that have been bouncing around quite significantly.
Black: And what about the geography of the portfolio? Obviously, we know that there is a lot of differences in terms of way countries are out in their recovery. So, where are you finding the best opportunities?
Peters: Yeah, if you look at where the companies are listed, then it's in developed markets, predominantly. But where they do business, they are very global in nature. And we are starting to see recovery in western markets, particularly the U.S. is obviously opening up. And we will see ultimately the same in Europe, although we've obviously recently had the delay to reopening in the U.K., but that's relatively short in the grand scheme of things.
Developing markets will follow suit at some point, but clearly how fast that happens will depend on how fast vaccination programs can roll out. And as we've experienced in the U.K., things can come out of left field like the Delta variant. So, we will see that ultimately the vaccination programs are rolling out and we will see a return to some sorts of normality, but the timescale is to be confirmed.
Black: Ben, thank you so much for your time. For Morningstar, I'm Holly Black.
