Tobacco industry backers are feeling the pressure from e-cig rivals

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The growth in popularity of e-cigarettes has left long term backers of tobacco companies worried about a potential shift; one that could 'fundamentally change UK portfolios'.

Tobacco companies have long been favourites for income specialists and other UK equity fund managers. However, backers from Aviva Investors and Allianz Global Investors have warned that e-cigarettes are their biggest concern when it comes to the sector's future, reports ftadvisor.com.

The slide in cigarette sales recently has prompted concern, with the change thought to be due – in part – to the increased popularity of e-cigarettes. Manager of Aviva Investors UK Equity Income fund Chris Murphy said: “e-cigarettes are my biggest concern. They are creating unresolved tensions that aren't being priced in and eventually the stock market will catch up.”

Simon Gergel, chief investment officer for UK equities at Allianz Global Investors, has reduced his weighting in Imperial Tobacco, but feels that the threat of e-cigarettes is 'misunderstood' by the industry. He said the appeal of tobacco companies lies in their high dividend yields and pricing discipline, yet the trend towards e-cigarettes is not actually creating a new investment opportunity. Gergel said: “There are no clear dominating companies.”

Despite this debate on investment, e-cigarettes continue to rise in popularity among consumers. Evidence of this came just last week when a street in Gloucester saw the opening of its third specialist e-cigarette shop, reported gloucestercitizen.co.uk.

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