With Prime Minister Theresa May’s withdrawal deal having been comprehensively voted down by parliament in January, the Brexit negotiation process is no closer to a resolution. The likelihood is that the answer – be it a no-deal Brexit, an extension to Article 50, or something else – will only emerge at the eleventh hour.
Any rally in the currency is likely to cause some difficulty for the share prices of companies with overseas, dollar-denominated earnings. Equally, another tumble in the currency could provide a boost for many of these large-cap names.
All these unknowns mean that while yields look attractive, it’s useful to know which funds in this space have not just paid a good income but grown investors’ assets over time.
Our analysis, the findings of which are outlined in Table 1, identifies the best performers over five years in the UK equity income space.
The table includes names from both the IA and the Association of Investment Companies’ UK Equity Income sectors, and investment trusts have a strong showing among the top performers. Two of the top three names over five years have a closed-ended structure, with three other trusts also appearing in our 20-strong list.
Income vs growth
The analysis does exclude one group of UK equity income offerings: those open-ended products that still sit in the IA’s UK All Companies sector, having previously failed to meet the UK Equity Income sector’s old yield requirements.
These requirements were eased in 2017 – members must now yield 100 per cent of the index yield over a rolling three-year period, down from the previous 110 per cent threshold – but some popular names remain in the UK All Companies group.
This means that Evenlode Income – which would sit in second place for its five-year returns, all things being equal, does not feature in the table. The Evenlode product’s 3.5 per cent yield at the end of December, well below that of the FTSE All-Share, does suggest this fund has sacrificed some potential income for greater capital growth.
Intermediaries will be familiar with the table’s top performer over five years: the Finsbury Growth and Income Trust, run by manager Nick Train, has returned £1,613 from a £1,000 lump sum. The fund also comes out top over one, three and 10 years.
Mr Train runs a concentrated portfolio, with just 23 holdings at the end of November, and keeps turnover low. The product has nearly half of its exposure in consumer goods names, with large caps Diageo and Unilever each making up a position of at least 10 per cent.
The vehicle also has more than a quarter of its assets in financials, with Hargreaves Lansdown and the London Stock Exchange among its 10 biggest holdings.
