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Promoted by Janus Henderson

Diversify your income in increasingly concentrated UK markets

More than a quarter of the money invested by equity income funds and investment trusts goes to just 10 stocks.

​The UK remains one of the strongest equity income paying markets in the world. It hosts a suite of multi-national corporations with long records of paying steady and rising dividends. More and more these strategies are being rewarded by investors, in part because of the thirst for yield amid record low bond yields and interest rates, but also because of its tendency to signal quality to investors: strong cash-flow, robust balance sheets and good corporate governance. If management is not spending money on important projects they are returning cash to shareholders, signalling to the market their continuing confidence in the business’ success that will in-turn bring fresh revenues for further projects. It can be true that companies awash with cash will eventually start to waste it.

But there’s a slight structural issue in the UK stock market: the top 20 companies pay 70% of all UK dividends; the top 10 pay 50%; the top five pay 35%.

Research by Janus Henderson has taken a closer look - analysing all of the UK equity income funds and investment trusts above £200m to see who holds what and in what concentration.

It was found that 26% of the money managed by the entire sector is invested in the following top ten stocks:



Imperial Brands

Royal Dutch Shell


British American Tobacco


Legal & General



Out of the 52 funds and investment trusts we looked at, the top ten stocks were held by this many of the portfolios:

Source: Janus Henderson Global Investors, Morningstar; as at Oct 2016.

It demonstrated that all of the top ten stocks are held, on average, by 70% of the funds in the sector. This is actually unsurprising: As equity income portfolios get larger, fund managers are forced to hold these same largest companies in order to receive enough dividends to pay all of their shareholders. It is further evidenced by the fact that, of the largest equity portfolios in the UK, the average percentage of the total portfolio held in these top ten stocks was 39%. When the liquidity pool is small, fund managers simply have little choice.

The percentages shift around over time but it does raise the idea of concentration risk. UK based investors are likely have the majority of their interests focused here, be it their job, houses, cars, investments, and so forth. Investors also often hold multiple funds to try to protect against a singular manager’s poor performance, but they are likely duplicating across many of the same stocks.

What happens when something goes unexpectedly and spectacularly wrong - oft referred to as a black swan event? The Macondo oil spill in 2010 is a good example, when BP was forced to cut its dividend amid the rising and uncertain cost of the disaster. As one of the top five dividend payers in the UK this led to substantial shortfalls for equity income fund managers.

Janus Henderson International Income Trust (HINT), managed by Ben Lofthouse, was launched exactly for these reasons in 2011. It is mandated to invest globally in income yielding equities but importantly it excludes the UK entirely, offering investors the chance to diversify away from their UK based investments and sources of income.  What is more, the types of businesses that deliver strong levels of dividends tend to differ between markets, meaning sector-level diversification is also possible in addition to the geographic diversification.

HINT is also an investment trust and we strongly believe this structure benefits investors seeking income - in any given year the fund manager is able to retain up to 15% of dividends in a reserve pot, so that during difficult times when stock markets are down and perhaps dividends are being cut, the fund manager can use the reserve to top up the income paid out to investors. The effect is to smooth the dividend stream paid-out over time, which may be useful to those who heavily rely on the income.

Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser.

The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

Nothing in this document is intended to or should be construed as advice.  This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment.

Issued in the UK by Janus Henderson Investment Funds Limited (reg. no. 2678531), incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE, is authorised and regulated by the Financial Conduct Authority to provide investment products and services. 

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Jeremy Corbyn supporters should stop excusing Labour’s anti-immigration drift

The Labour leader is a passionate defender of migrants’ rights – Brexit shouldn’t distract the new left movement from that.

Something strange is happening on the British left – a kind of deliberate collective amnesia. During the EU referendum, the overwhelming majority of the left backed Remain.

Contrary to a common myth, both Jeremy Corbyn and the movement behind him put their weight into a campaign that argued forcefully for internationalism, migrants’ rights and regulatory protections.

And yet now, as Labour’s policy on Brexit hardens, swathes of the left appear to be embracing Lexit, and a set of arguments which they would have laughed off stage barely a year ago.

The example of free movement is glaring and obvious, but worth rehashing. When Labour went into the 2017 general election promising to end free movement with the EU, it did so with a wider election campaign whose tone was more pro-migrant than any before it.

Nonetheless, the policy itself, along with restricting migrants’ access to public funds, stood in a long tradition of Labour triangulating to the right on immigration for electorally calculated reasons. When Ed Miliband promised “tough controls on immigration”, the left rightly attacked him.  

The result of this contradiction is that those on the left who want to agree unequivocally with the leadership must find left-wing reasons for doing so. And so, activists who have spent years declaring their solidarity with migrants and calling for a borderless world can now be found contemplating ways for the biggest expansion of border controls in recent British history – which is what the end of free movement would mean – to seem progressive, or like an opportunity.

The idea that giving ground to migrant-bashing narratives or being harsher on Poles might make life easier for non-EU migrants was rightly dismissed by most left-wing activists during the referendum.

Now, some are going quiet or altering course.

On the Single Market, too, neo-Lexit is making a comeback. Having argued passionately in favour of membership, both the Labour leadership and a wider layer of its supporters now argue – to some extent or another – that only by leaving the Single Market could Labour implement a manifesto.

This is simply wrong: there is very little in Labour’s manifesto that does not have an already-existing precedent in continental Europe. In fact, the levers of the EU are a key tool for clamping down on the power of big capital.

In recent speeches, Corbyn has spoken about the Posted Workers’ Directive – but this accounts for about 0.17 per cent of the workforce, and is about to be radically reformed by the European Parliament.

The dangers of this position are serious. If Labour’s leadership takes the path of least resistance on immigration policy and international integration, and its support base rationalises these compromises uncritically, then the logic of the Brexit vote – its borders, its affirmation of anti-migrant narratives, its rising nationalist sentiment – will be mainlined into Labour Party policy.

Socialism in One Country and a return to the nation state cannot work for the left, but they are being championed by the neo-Lexiteers. In one widely shared blogpost on Novara Media, one commentator even goes as far as alluding to Britain’s Road to Socialism – the official programme of the orthodox Communist Party.

The muted and supportive reaction of Labour’s left to the leadership’s compromises on migration and Brexit owes much to the inept positioning of the Labour right. Centrists may gain personal profile and factional capital when the weaponising the issue, but the consequences have been dire.

Around 80 per cent of Labour members still want a second referendum, and making himself the “stop Brexit” candidate could in a parallel universe have been Owen Smith’s path to victory in the second leadership election.

But it meant that in the summer of 2016, when the mass base of Corbynism hardened its factional resolve, it did so under siege not just from rebelling MPs, but from the “Remoaners” as well.

At every juncture, the strategy of the centrist Labour and media establishment has made Brexit more likely. Every time a veteran of the New Labour era – many of whom have appalling records on, for instance, migrants’ rights – tells Labour members to fight Brexit, party members run a mile.

If Tony Blair’s messiah complex was accurate, he would have saved us all a long time ago – by shutting up and going away. The atmosphere of subterfuge and siege from MPs and the liberal press has, by necessity, created a culture of loyalty and intellectual conformity on the left.

But with its position in the party unassailable, and a radical Labour government within touching distance of Downing Street, the last thing the Labour leadership now needs is a wave of Corbynite loyalty-hipsters hailing its every word.

As the history of every attempt to form a radical government shows, what we desperately need is a movement with its own internal democratic life, and an activist army that can push its leaders as well as deliver leaflets for them.

Lexit is no more possible now than it was during the EU referendum, and the support base of the Labour left and the wider party is overwhelmingly in favour of free movement and EU membership.

Jeremy Corbyn, John McDonnell and Diane Abbott are passionate, principled advocates for migrants’ rights and internationalism. By showing leadership, Labour can once again change what is electorally possible.