It’s not hard to see why income investing is out of fashion at the moment. The last few years have seen momentum-led strategies deliver massive gains, outperforming traditional value and yield-led strategies. Ed Croft commented on this in January’s NAPS report, outlining how QM (quality-momentum) and VM (value-momentum) stocks have outperformed QVM (StockRank) portfolios over the last five years.

You can see the latest data on this page - at the time of writing, top QM Rank stocks have delivered a five-year return of 121%. Top StockRanks have managed 65%, while top QV-ranked stocks have gained just 15%. Life’s been tough for traditional value investors.

If the massive outperformance of momentum strategies wasn’t enough to discourage investors from relying on dividend income, this year’s unprecedented bout of dividend cuts and suspensions probably sealed the deal. Although many firms are now reinstating payouts, a lot of former high-yield favourites are using this opportunity to rebase their dividends to a lower level.

Ironically, among the companies whose dividends have proved safe so far this year are a number of asset managers. Names such as Ashmore (I hold), Polar Capital Holdings, Schroders and M&G have so far maintained their payouts despite crashing markets and the threat of widespread recession.

Today I want to look at one of the companies I’ve listed above, Polar Capital Holdings (LON: POLR). This AIM-listed fund manager passes my SIF screening rules and has built a reputation for strong performance from its specialist and autonomous fund teams.

As something of an income investor myself, I’m also attracted to Polar’s 6.5% dividend yield, which looks relatively safe to me.

The Polar difference

Active fund managers have found life increasingly tough in recent years, as markets have often moved in lockstep with floods of QE cash. Cheap passive funds have worked well and attracted big inflows.

Polar’s approach to active management is to provide good quality infrastructure and a high level of autonomy for its investment teams. The aim is to then attract and retain top-performing investment teams. Here’s an example of the firm’s team acquisition strategy in action.

Recent performance: Polar Capital reported assets under management of £16.4bn at the end of September. During the previous six months the company enjoyed net client inflows of £907m while its investments delivered market gains of £3.6bn. The company says that 70% of…

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