Hugh Yarrow, manager of the Evenlode Income Fund, believes the UK’s Brexit vote will create both political and economic uncertainty in the short and medium term. As an equity strategy consisting of primarily UKlisted shares, Evenlode is not immune, but Yarrow says the team always aims to insulate the portfolio from uncertainty – rather than predict it.
"Times like this are a reminder that investment is a marathon not a sprint, and controlling risk is very important for the long-term investor," he says. "As a result of our cautious approach, our portfolio has several reassuring characteristics that give us confidence in the ability to continue generating healthy cash flows and dividends." For example, roughly 80% of cash flows for companies in the Evenlode portfolio are generated outside the UK.
"For UK-based investors, the sharp fall in the pound represents a positive tailwind to reported cash flows and the ability of UK multinationals to pay and grow dividends in sterling. In some cases sterling weakness may improve competitiveness against global peers," Yarrow adds. "Our process and preference for global cash flows also means we have little or no exposure to some of the sectors that may be most impacted by Brexit."