Falling pound poses threat to UK equity income returns

UK equity income fund managers have cautioned sterling's steep decline could harm the sector's returns later this year as imported inflation floods into the market.

The weakness of the pound, which has fallen 5.8% against the dollar to $1.53 since the turn of the year to 24 April, has benefited managers in the sector thus far as positions in dollar-denominated dividend payers and overseas earners get a boost from the FX markets. However, UK income fund managers have suggested sterling’s deprecation will only provide a short-term boost for stocks. Managers urged investors to tread carefully in the consumer discretionary space, particularly in UK high street retailers, who rely heavily on imported goods. Eric Moore, deputy manager of the PSigma ...