Are 'bond tourists' a threat to UK equity income funds?

"Bond tourists" investing in dividend-paying stocks are causing concern for UK equity income managers, who predict increased volatility as debt starts to sell off.

Elevated valuations across bond markets have pushed many fixed income investors into quality equities in their search for yield, and recent events have intensified concerns over what happens when the fixed income tide reverses. The end of last week saw ‘bond proxies’ such as UK-listed utilities Centrica and SSE sell off in tandem with European sovereign debt, while consumer staples such as Unilever were knocked by April’s bond slump. Chris White (pictured), manager of the £403m Premier Income fund, expects income managers to move away from these sectors towards more cyclical stocks. H...