Stock selection the key driver with sector themes less obvious

It has been a difficult year for UK equity income funds. Since the spring, markets have made a significant comeback, while some conditions are improving the environment is still not normal.

Amid the extremely challenging economic conditions in which companies have had to continue to do business, many firms have been hoarding cash as they struggle to survive. Value has also been diluted as more firms have sought to raise money through rights issues as banks have been unwilling to continue to finance highly leveraged business models. Under these circumstances, it is not surprising large dividend cuts have been a key feature of the market over the past year. The taboo of cutting dividends has been broken and, with trading conditions remaining tough, some companies have give...