The FTSE has made little progress over the last two years. On 28 May 2010 it stood at 5,188. Today it has risen to just 5,347.

With the outlook for markets continuing to hang in the balance, investors would be wise to consider funds that can make a return in almost any market.


Trojan Income

"When markets are flat and economic growth anaemic, an income stream becomes all the more important," said David Coombs, head of multi-asset investment at Rathbones.

"We have held the Troy Trojan Income fund in Rathbone Total Return since November 2009, as we feel that the manager, Francis Brooke, has a style which is particularly attractive for an income mandate."

"The manager focuses on capital preservation, achieving consistent returns with low volatility and a bias towards quality. Significantly, it is index-agnostic."

"There are typically 40 stocks in the portfolio where the manager has high conviction, and each with a weighting of 2 to 3 per cent."

"The fund has grown significantly from £120m when we first purchased it to £600m today. The portfolio construction of the fund tends to make it less volatile than other income funds and more defensive in falling markets."

Performance of fund vs sector and benchmark over 2-yrs



Source: FE Analytics

Data from FE Analytics shows that the fund has returned 25 per cent over the last two years, in which markets have been almost completely flat. This compares with 13.5 per cent from the average UK Equity Income fund.


John Laing Infrastructure

Rob Burdett, co-head of multi-manager at Thames River, has gone for something a bit different: "I would choose an infrastructure fund such as John Laing Infrastructure," he said.

"This company owns the contracts to manage various Government assets including things such as the M40."

"The fund pays a 5 per cent-plus dividend, has its income effectively backed by Government cash flows and there is also an element of inflation-linking too."

"Unsurprisingly it proved very low Beta through the testing market conditions of last summer and is proving to be so again right now. It is a classic "get rich slowly but relatively surely" type of investment."

"There are risks such as Government regulations towards such assets changing, and financing costs should the credit crunch return, but these both seem remote at present in our judgement."

Our data shows the investment trust has returned 7.59 per cent since it was launched on 29 November 2010. This compares with 2.25 per cent from the average Infrastructure trust.


M&G Corporate Bond

FundExpert.co.uk’s Damien Fahy says that investors worried about a subdued economic outlook should consider funds with a low-risk profile and a proven record of preserving capital during leaner years.

"Our choice might be a little boring but in the current environment of low growth, high unemployment and downside risk, we’re recommending that investors stay reasonably defensive," he said.

"M&G Corporate Bond is likely to benefit in the flight to safety should the problems in the eurozone escalate."

"Richard Woolnough, who heads up the fund, tends to favour high quality investment grade corporate and government bonds and was one of the few who preserved capital in the wake of the 2008 financial crisis."

"Bond funds are going to underperform equities over the long-term but we’re using the fund as a sort of holding station until confidence returns. Our research suggests the FTSE could go as low as 4,000 so we’re positioning our clients defensively and waiting for an attractive entry point."

Data from FE Analytics shows that over the last decade, the fund has returned 80.03 per cent versus 48.59 per cent from the average fund in the Sterling Corporate Bond sector.

Performance of fund vs sector over 10-yrs



Source: FE Analytics


Invesco Perpetual Income

Richard Troue, fund analyst at Hargreaves Lansdown, thinks that income is the key for investors who want to outperform in a flat market – and sees no better manager in this area than Neil Woodford.

"Funds holding large, solid companies with the ability to pay increasing dividends in challenging conditions are essential in a flat market," he said.

"Over the last 10 years Neil Woodford’s Invesco Perpetual Income fund has managed to achieve a very good return while the market has struggled to do very much at all."

"He’s very positive on pharmaceuticals at the moment and has a decent exposure to tobacco stocks as well. These companies can churn out solid dividends with the chance for capital growth over the long-term."

Our data shows that Invesco Perpetual Income has returned 110 per cent over the last decade, more than twice the average UK Equity Income fund. It has also been considerably less volatile than the majority of its peers over the long-term.


Newton Asian Income

"Along similar lines we recommend Newton Asian Income," added Troue. "It holds companies with strong cash flows, resilient earnings and plenty of shareholder value."

"There is a growing dividend culture emerging within Asian markets and this means that funds which hold the good-quality companies do not need to rely on capital growth."

"It also gives the benefit of diversification away from the UK market with an extra income kicker. Reinvesting dividends can give a real boost to investments in a flat market."

Newton Asian Income has returned 28.87 per cent in the last two years that equity markets have remained flat. Meanwhile, the average Asia Pacific ex Japan fund has returned just 1.19 per cent.