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The UK equity income funds putting the most cash in your pocket

20 October 2014

In the next article of FE Trustnet's income campaign, we show you the funds that have delivered the most in income over the seven years since the start of the financial crisis.

By Gary Jackson,

News Editor, FE Trustnet

Schroder Income Maximiser and Newton Higher Income have paid out more cash than any of their rivals in the IMA UK Equity Income sector over the seven years of the past market cycle, research by FE Trustnet shows.

Given the persistent search for income, we have been focusing on this issue of late and recently launched a campaign to improve the amount of income information available to investors.

In the next article of the campaign, we examine the UK equity income funds that have put the most money in their investors’ pockets since 2007.

According to FE Analytics, Thomas See’s £1.1bn Schroder Income Maximiser fund paid out £480 for every £1,000 invested between 1 January 2007 and 31 December 2013.

This compares with an average of £287 per £1,000 paid out by the average IMA UK Equity Income member.

The fund is consistently one of the highest payers in the sector as it makes use of short-dated call options to generate additional income.

Its portfolio is the same as Kevin Murphy and Nick Kirrage’s £1.5bn Schroder Income fund, with differences in performance coming from its ability to use derivatives.

Income earned per £1,000 over 7 years


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Source: FE Analytics

The four FE Crown-rated fund is a member of the FE Research team’s Select 100 list of recommended funds thanks to Schroders’ reputation in UK equities and its track record in delivering income.

However, it’s ranked 145 out of 252 funds covered by the team’s recent income study, scoring highly for its yield but less well for its dividend stability and downside protection.

FE Research suggest it could be an attractive option for investors who are willing to take exposure to complex financial instruments in pursuit of income.

It also expects it to maintain a much higher distribution than the rest of the sector.

Schroder Income Maximiser has a clean ongoing charges figure (OCF) of 0.91 per cent and yields 7.16 per cent.

As part of FE Trustnet’s income campaign, we must point out that the fund does not publish its dividend history on its fact sheet.

Newton Higher Income, which is ran by FE Alpha Manager Christopher Metcalfe, has been the second highest payer of the last seven full calendar years with a payout of £395 on every £1,100 invested on 1 January 2007.


Income earned per £1,000 over 7 years

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Source: FE Analytics

It currently yields 4.02 per cent, FE Analytics shows, compared with the FTSE All Share’s yield of around 3.2 per cent.

However, it has gone through a number of changes over recent years, which have affected its ability to grow its dividend and added a degree of uncertainty around the fund.

The fund has been under the charge of three managers since December 2012 - Tineke Frikkee, Richard Wilmot and Metcalfe, who has helmed the portfolio since March 2014 after Wilmot’s departure.

It has also changed its strict yield criterion from only holding stocks that yield more than 115 per cent of the All Share to allowing those that yield more than 75 per cent.

This move will increase the flexibility of the fund but meant its dividend was cut.

Indeed, the fund paid a lower dividend in 2013 than it did in 2007 - paying 6.06p per unit in its B Inc share class in 2007 but just 5.05p last year. FE Research placed it in 63rd place in its income study thanks its high yield and downside protection track record.

Newton Higher Income has a clean OCF of 1.04 per cent. It publishes its income history on its retail fact sheets but not those aimed at advisers.

Income earned per £1,000 over 7 years

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Source: FE Analytics

Our research shows FE Alpha Manager Leigh Harrison and Richard Colwell’s £772.8m Threadneedle UK Equity Alpha Income fund is third place, paying £340 on £1,000 over seven years.

Its dividend has grown 26 per cent over this time. The five crown-rated fund yields 4.2 per cent and is managed with a total return approach.

It sits in the sector’s second quartile over one year and is first quartile over three and five years.

It has a clean OCF of 0.88 per cent but does not put dividend history on its fact sheet.


Clive Beagles and James Lowen's £2.7bn JOHCM UK Equity Income comes next on the income earned leaderboard with a total payout of £334 over seven years.

It appears on the Select 100, with the FE Research team highlight its record in beating both the IMA UK Equity Income average and the FTSE All Share.

It invests in more small and medium sized companies than its average peer which means it can see greater fluctuations in its returns but has helped it achieve first quartile returns over three and five years.

JOHCM UK Equity Income has clean ongoing charges of 0.67 per cent, yields 3.97 per cent and has grown its dividend by 17 per cent over seven yields. Its factsheet includes no dividend history.

FE Alpha Manager Francis Brooke’s £1.8bn Trojan Income has the fifth highest payout over seven years, according to our research, after putting £333 in investors’ pockets on a £1,000 investment made seven years ago.

The fund holds five FE Crowns and appears on the Select 100, winning its place thanks to the strong long-term performance delivered by its cautious approach and prioritisation of preserving capital.

It was also the top ranked fund in the FE Research Income study after scoring highly in all three categories - yield, dividend stability and downside protection.

In keeping with its investment approach, the fund scooped a maximum 100 points for downside protection.

Trojan Income has a clean OCF of 1 per cent, has grown its dividend by 28 per cent over the past seven years and yields 3.99 per cent. Its dividend history is not on its fact sheet.

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Source: FE Trustnet research

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.