KAMES DIVERSIFIED MONTHLY INCOME: 'Steady Eddie' fund manager's strategy is paying off

By JEFF PRESTRIDGE, MONEY EDITOR AT LARGE

Updated: 07:47 EST, 2 October 2017

e-mail

If a nickname were given to Vincent McEntegart, manager of Kames Diversified Monthly Income, it would be ‘steady Eddie’. For steady McEntegart, who is in his 50s, is not your typical testosterone-fuelled manager in search of returns that will stand his fund apart from the madding crowd.

No way. He is far more comfortable eking out single digit annual returns for his investors rather than trying to shoot out the proverbial investment lights.

McEntegart says: ‘I run the fund for those who need a regular income from their capital and a modest total return. It is a fund where the price volatility is low.’

So far steady Eddie has been true to his word. Since the fund’s launch in early 2014, it has delivered a total return of just over 34 per cent, better than what an investor would have received if they had invested through a vehicle tracking the performance of the FTSE All-Share Index.

Impressively, the fund’s performance has been consistent. In the past year, it has registered a total return of just under 10 per cent. In the previous 12 months, it was 11 per cent, while in the year ending mid-September 2015 it was a more modest 5.6 per cent.

With regards specifically to income, the target is 5 per cent a year – currently McEntegart is generating 5.5 per cent. So far, monthly income distributions have ranged from 0.34p per share in September 2014 to 0.74p in July 2017.

The share price is currently 134p. Steady income.

'Steady Eddie': Vincent McEntegart, manager of Kames Diversified Monthly Income

The key to McEntegart’s consistency is to maintain a diverse portfolio across a broad church of assets – from bonds to shares in firms tapping a rich vein of income in infrastructure projects. But the biggest holding is bonds because of the greater certainty of income.

The fund has more than 200 positions with no one stake representing more than two per cent of the portfolio. The biggest holding is in Greencoat UK Wind, a FTSE 250-listed firm that invests in UK wind farms.

A final layer of diversification is provided by the fund’s reach, with holdings scattered across the globe – from Turkish and Australian government bonds to Japanese equities.

It makes for an interesting portfolio with familiar names such as Direct Line and Legal & General sitting alongside the unfamiliar, such as listed South African firm Growthpoint Properties and Spanish infrastructure giant Ferrovial. McEntegart says:

‘Though most people know Ferrovial as the owner of Heathrow Airport, 80 per cent of its assets are toll roads, which it operates in North America.

‘It owns the toll road that circles Toronto and does not require motorists to stop at booths to pay. Instead, users are identified and charged by electronic vehicle detection devices.

Such infrastructure projects throw off an attractive income, which is ideal for the fund I run.’

He draws upon all of the investment expertise within Edinburgh-based Kames to come up with stakes that will help him deliver a steady return and an attractive monthly income.

He says: ‘My main task is to deliver outcomes for investors. I could not find 200 ideas to populate the fund on my own. They come from a team of professionals within Kames.’

Kames is the former asset management arm of Scottish Equitable, which was bought by Dutch giant Aegon and renamed Kames six years ago. It runs funds totalling £45 billion.

Although the portfolio is global, McEntegart does not expose investors to currency risk. He removes this by hedging.