Geffen (pictured right), whose Neptune Quarterly Income fund sits in the sector, is bearish on the UK economy, and believes that indirect exposure to emerging markets will maximise the performance of funds in the sector. He said: "We remain cautious about the UK consumer and hence we remain underweight in companies exposed to discretionary spending in the UK."
"With 70 per cent of the FTSE 100's earnings derived overseas, there are plenty of opportunities to take advantage of emerging market growth within UK stocks.
"An example of this is British American Tobacco with around 50 per cent of earnings and 70 per cent of volumes from developing markets. One of our favourite financials is Standard Chartered, which has the majority of its sales in Asia Pacific, India and the Middle East."
Geffen also said that he looked to maximise the fund's direct exposure to markets outside the UK. The IFA stipulates that funds in the UK Equity Income sector must invest at least 80 per cent in UK equities. The Quarterly Income fund has typically utilised the remaining 20 per cent fully, in order to capitalise on the impressive performance of emerging markets.
"We always use the permitted 20 per cent to go off-benchmark into other attractive income stocks globally. These are usually our best income ideas in developed markets such as the US and Europe but we also take ideas from other markets such as Hong Kong."
The Neptune Quarterly Income fund has 81.6 per cent invested in UK equities currently; one of the lowest margins in the sector.
This exposure to international markets has seemingly paid off. Financial Express data shows that the fund has outperformed the sector by nearly 14 per cent in the last five years.
Performance of fund vs sector over 5-years
Source: Financial Express Analytics
While Fidelity Enhanced Income manager Michael Clark agreed that exposure to international markets was very important, he said that this was due to the cyclical nature of the UK market, rather than the current economic climate.
"Broadly, the decent UK income stocks gain exposure from abroad. Pharmaceutical companies are extremely international for example, and names like Tesco and Vodafone rely a great deal on overseas earnings."
"We are wary of the unstable cyclical earning streak of some UK companies. However, we are overall optimistic about the state of the economy. We don't think the recent spending cuts will cause companies to cut large dividends, and believe that steady growth will continue."
Clark said that opportunities still exist among more domestically focused companies, particularly in the utilities market.
"I think utilities offer a great opportunity for investors. UK water and electricity have very good yields, with good inflation protection. There are also some great mid-cap companies out there at the moment, which will continue to prosper as the economy experiences slow growth."
Ken Wright, managing director of KDW Financial Services was similarly optimistic: "I think the UK still has a lot to offer in its own right. Corporate profits are recovering and dividends are higher as a result. Though the public sector has suffered from the governments cuts, the private sector is still going very strong."