Attractive valuations and dividends are not enough to persuade Job Curtis, who runs the £1.5bn City of London Investment Trust, to turn to UK domestic earners for income.
The trust has increased its dividend for each of the past 51 years. The current yield on the trust is 3.9 per cent.
Mr Curtis said while the price to earnings ratios and dividend yields of UK domestic earners are enticing, the evidence suggests all bad news is not currently reflected in the share prices.
He said central to the argument, put forward by among others Invesco Perpetual’s Mark Barnett, that UK domestic shares are cheap, is the view that having fallen so far, the shares represent value, whatever happens to the wider economy.
Mr Curtis said while he sees the logic of that argument, he is wary of it.
“We recently saw an update from Greene King, a pub company which we own, the update was negative and you would think the share price was already discounting bad news, but the shares suffered quite a sharp fall.
"That implies UK domestic shares are not already priced at a level to reflect bad news.”
The fund manager said the level of economic uncertainty in the UK is unprecedented, and added to an element of political risk, the outlook for shares that derive the greater part of their revenue from within the UK is murky.
That outlook has prompted Mr Curtis to focus on overseas earners, despite the valuations being higher.
The fund manager said that this time last year there was uncertainty about the sustainability of companies such as BP, Shell and HSBC.
He said BP and Shell have done a “remarkable” job at cutting costs, and with the oil price stable, the dividends should be durable. Of HSBC he said the fact the company has embarked on a share buyback initiative shows the strength of the dividend.
A common feature of the large cap stocks he mentioned above is they pay dividends in dollars. This meant last year the dividends were worth more to sterling investors as the dollar was strong.
The dollar has been weak against sterling this year, but Mr Curtis said the global economy is performing well, allowing those companies to increase dividends without the aide of a currency fluctuations.
He has recently bought shares of FTSE 100 mining company Anglo American. He said the outlook for the mining sector has improved due to the improved growth outlook in China and Europe.
Clive Beagles, who runs the £3.3bn J.O Hambro UK Equity Income fund, is another investor who has recently begun to invest in Anglo American shares.
He said: "Its share price has gone up a lot from the lows seen at the end of 2015, but it is important to focus on the new strategy and the current valuation metrics when assessing the stock from an investment perspective.