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George Luckcraft has apologised to investors over poor performance on his AXA Framlington Equity Income and Monthly Income funds, blaming financial stocks.
Luckcraft is currently 48th out of 55 managers in the sector for his performance on the AXA Framlington Equity Income Inc fund over a three year period. On aggregate, his funds are down 19.9% over the past year versus an average manager loss of 13.5%.
‘It is very difficult to run an income portfolio without banks,’ said Luckcraft during a conference call with investors. ‘I should have had miners with hindsight.’
Luckcraft is far from alone in having struggled in the sector over the past 12 months.
This is reflected by the fact that Threadneedle's Citywide AA-rated Leigh Harrison topped the equity income for his Threadneedle UK Equity Alpha Inc Net Dist GBP and Threadneedle UK Equity Income C1 funds, despite an aggregate return of 1.92% over the period.
Luckcraft has acted by trimming the fund's holding in HSBC to 4%. He also remains underweight in RBS and Barclays on concerns about extended weakness and rights issues.
Meanwhile, he has doubled his exposure to BP and Shell from two years ago, reaching 4.5% of overall assets each.
Homebuilder Barratts was a no-go on its potential need to raise capital to cover leverage he said, although he believes a lot of other consumer-facing stocks were potentially oversold.
Luckcraft added that small cap underperformance had also acted as a weight on returns but said that he was confident that merger and acquisition activity would pick up this year.
Equity income has struggled relative to the FTSE as the traditionally high yielding financial stocks used to generate regular returns have slumped in the past nine months.
Other traditional yielders, such as media stocks, have also been in long-term decline. In contrast, light-yielding businesses such as miners and other commodities have produced a disproportionate level of capital return over the past year.