Rathbone Income fund excelled in 2025 after a lackluster 2024, outperforming UK equity income category with a 23% return. Managers reduced exposure to financial stocks in anticipation of further interest rate drops in 2026. The fund’s success in 2025 was attributed to strong investments in listed banks and well-timed stock adjustments.
Managers Alan Dobbie and Carl Stick shared how they turned Rathbone Income’s performance around after a dismal 2024. The fund’s Silver Morningstar Medalist Rating reflected its stellar 23% return in 2025, surpassing the category average. Investments in financial stocks boosted the fund’s performance, placing it in the top 30% of performers in its category.
2024 saw Rathbone Income struggle, ending in the bottom 10% of UK equity income funds due to ill-timed stock sales and external events. Manager Alan Dobbie admitted mistakes, including a premature exit from Close Brothers. Despite setbacks, the managers remained steadfast, with Stick announcing his retirement for 2026.
For 2026, Rathbone Income managers anticipate a broadening market rally and lower interest rates. They plan to reduce exposure to banks and defense stocks in favor of cheaper, smaller-cap stocks poised to benefit. The UK market’s strong start in 2026 signals potential for further growth, offering a defensive alternative amid global market unease. Dobbie and Stick are shifting focus away from mega-caps to find new opportunities, reducing exposure to top holdings while seeking quality companies and increased exposure to cyclicals and mid-caps for 2026. They are particularly interested in sectors like REITs, regulated utilities, healthcare, consumer staples, and housebuilders. The Rathbone Income fund has a strong long-term performance, consistently outperforming its category average between 2020 and 2023. Morningstar metrics for the fund include a Silver Medalist Rating, UK Equity Income category, £588 million fund size, and an ongoing charge of 0.52%. The managers also bought back into Bunzl and added Whitbread as new holdings, emphasizing the importance of patience in investing in undervalued businesses.
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