The IA Mixed Investment 20-60% Shares sector is one of the most popular peer groups with investors, as its members offer diversification across a spread of asset classes and a ‘balanced’ level of risk. 
These characteristics mean that the sector is also home to some of the industry’s most notable multi-asset income funds, with the likes of Jupiter Merlin Income, Invesco Perpetual Distribution and F&C MM Navigator Distribution being found there.
Last week, FE Trustnet showed how the income pay-outs of UK funds look when presented in graph form as part of our ongoing campaign to improve transparency around income so in the next article of the series we look at five high-profile members of the IA Mixed Investment 20-60% Shares sector.
Over the coming weeks, we'll be putting other popular income funds under the same spotlight.
Jupiter Merlin Income Portfolio
Source: FE Trustnet, on an initial investment of £1,000 on 1 Jan 2005
With assets of £4.4bn, the Jupiter Merlin Income Portfolio is the largest member of the sector and is headed up by the FE Alpha Manager duo of John Chatfeild-Roberts (pictured) and Algy Smith-Maxwell.
It’s a fund of funds and is designed to be used as a one-stop shop for investors. Holdings include popular equity income funds such as Artemis Income, CF Woodford Equity Income and M&G Global Dividend, as well as bond portfolios like Jupiter Strategic Bond, GLG Strategic Bond and Kames High Yield Bond.
Since Chatfeild-Roberts joined the portfolio in April 1997, the fund has paid out just over £1,200 in income on an initial investment of £1,000. The total return over this time has been 244.58 per cent, against the sector’s 140.39 per cent.
Portfolio construction starts with the managers’ view of the global economy, then they search for funds best placed to exploit this outlook. This approach has made the fund of the top performers in the sector over the long run, although it has run into difficulties in more recent years.
The strong long-term track record and the managers’ experience have won the fund a place on the FE Select 100. The FE Research team said: “Chatfeild-Roberts and his team have become a fund-of-funds reference point in recent years. Their two-pronged approach of looking to profit from long-term investment themes and selecting managers they believe can add value in their area of expertise has proved to be particularly effective.”
Jupiter Merlin Income has a clean ongoing charges figure (OCF) of 1.54 per cent and yields 2.90 per cent.
Schroder MM Diversity Income
Source: FE Trustnet, on an initial investment of £1,000 on 1 Jan 2011
Schroder’s multi-manager team of Marcus Brookes and Robin McDonald have built up a strong track record while running their range of funds, although their defensive positioning has hurt returns over more recent time frames.
The £214.2m fund has paid out £152.81 on an investment of £1,000 made when the managers took over the portfolio in December 2010. It has also made a total return of 31.40 per cent over this time frame, compared with a sector average of 27.23 per cent.
Square Mile, which gives Schroder MM Diversity Income an ‘A’ rating, said: “Brookes and McDonald have worked together for a number of years and have considerable experience in managing multi-asset fund of funds strategies.”
“Over the years they have developed a sensible and considered approach and are aware of the more conservative nature of this fund’s investor base. The managers have proven their ability to successfully manage money across a variety of market conditions and are particularly mindful of capital volatility.”
The fund has around 26 per cent of assets in cash, with just 15 per cent in bonds and 11.5 per cent in alternatives. Its largest holding is RWC Enhanced Income at 21.6 per cent, followed by RWC Enhanced Dividend, Invesco Perpetual Monthly Income Plus and Majedie Tortoise.
Schroder MM Diversity Income has a 1.29 per cent clean OCF and yields 2.91 per cent.
F&C MM Navigator Distribution
Source: FE Trustnet, on an initial investment of £1,000 on 1 Jan 2008
As well as the teams at Jupiter and Schroders, F&C’s Gary Potter and Rob Burdett are among some of the most highly respected multi-managers in the industry and have together since 1996. It has an aim of producing an income in-line with the top 10 per cent of income generators in its peer group.
Their F&C MM Navigator Distribution fund has posted a 46.23 per cent total return since launch in October 2007, against a sector average of 32.71 per cent, and has generated income of £426.61 on an initial £1,000. As the graph above shows, the fund has a good track record in terms of increasing its payouts.
Square Mile gives the fund an ‘AA’ rating and said: “The team have established a robust and consistent investment approach that is focused on fund manager selection with limited asset allocation ambitions; this we believe plays to their main strength.”
“The team have excellent knowledge of the investment industry and we see them as sensible investors. We believe this is a suitable fund for investors who want a fund of funds that is managed to deliver income from a multi-asset approach that invests across a broad range of asset classes.”
The fund currently has around one-third of assets in fixed income but avoids larger, conventional funds in favour of nimble and flexible offerings like GLG Strategic Bond and TwentyFour Dynamic Bond. Top equity holdings include Ardevora UK Income, Artemis Global Income and BlackRock Continental European Income.
F&C MM Navigator Distribution has ongoing charges of 1.47 per cent and yield 4.50 per cent.
Invesco Perpetual Distribution
Source: FE Trustnet, on an initial investment of £1,000 on 1 Jan 2004
This five FE Crown-rated fund is a very popular option among advisers and private investors, making it one of the largest in the IA Mixed Investment 20-60% Shares sector with assets of £3.4bn. It is managed by Paul Causer, Paul Read and Ciaran Mallon.
Unlike the other funds highlighted in this article, this fund does not take a multi-manager approach and builds its portfolio directly from equities and bonds. Its top stock holding is Imperial Tobacco, followed by British American Tobacco and Whitbread; it also has bonds from Lloyds and RBS in its top 10.
Since launch in January 2004 an initial investment of £1,000 would have yielded £792.27 in income payments and the annual level of income has broadly risen over this time, although there have been falls in recent years. Looking at total return and the fund has gained 133.41 per cent since inception, against a sector average of 76 per cent.
The FE Research team said: “The managers have a gloomy outlook for bonds and have been increasing their holdings of cash and very low-risk, low-yielding securities. This means the portfolio will probably make smaller gains than it has in the past. Most gains should come from income rather than capital growth, they say.”
“The position in bank debt remains very significant, which means the health of the banking system is important for this fund. However, this will be slowly reduced as the bonds mature, as the managers don’t see the same opportunity in the new bonds being issued.”
Invesco Perpetual Distribution has a clean OCF of 0.82 per cent with a yield of 4.34 per cent.
Premier Multi-Asset Distribution
Source: FE Trustnet, on an initial investment of £1,000 on 1 Jan 2004
This five FE Crown-rated fund – which is managed by David Hambidge, Ian Rees, Simon Evan-Cook and David Thornton – has been one of the most popular funds in the sector over the past year, with assets surging to £627m.
It’s another multi-manager fund and pays out income quarterly. Top holdings include Fidelity MoneyBuilder Dividend, Franklin UK Equity Income, Standard Life UK Property Income and Pimco Select UK Income Bond.
Over 10 years, income of £517.95 has been paid out on an initial £1,000 while the total return has been 71.61 per cent, compared with the peer group average of 56.49 per cent.
Square Mile, which gives the fund an ‘AA’ rating, said: “We have a high regard for this focused and stable team that is led by the experienced David Hambidge. They have an excellent appreciation of the outcomes that investors seek and this well diversified portfolio has historically generated performance that has met its objectives.”
“The team has a long established investment approach and this has been implemented consistently for a number of years. They seek investments that will help to diversify the overall portfolio and those which can deliver stable and repeatable income streams.”
Premier Multi-Asset Distribution has a 1.43 per cent clean OCF with a yield of 4.10 per cent.
