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Highly rated multi-asset funds for investors seeking monthly income

FE Trustnet goes in search of multi-asset funds that pay out monthly dividends and hold the highest FE Crown Ratings.

Gary Jackson

By Gary Jackson, Editor, FE Trustnet
Monday June 19, 2017

Funds such as Artemis Monthly Distribution, Fidelity Multi-Asset Income and Jupiter Distribution are among the multi-asset funds that pay out a monthly income and hold some of the highest FE Crown Ratings, data from FE Analytics shows.

Many investors build income portfolios from funds that pay quarterly dividends but there are a growing number of funds that offer monthly income payouts to their investors. In a recent article, we highlighted the UK equity funds that do this have have four or five FE Crowns.

The Investment Association universe is home to almost 290 funds that pay out 12 dividends a year, so in this article we will look across the four multi-asset sectors to find out which measure up the best according to FE's Crown Ratings.

FE Crown Fund Ratings are quantitative ratings ranging from one to five and are designed to help investors identify funds which have displayed superior performance in terms of stockpicking, consistency and risk control. They are designed to distinguish between funds that are strongly outperforming their benchmark and those that are not, although it must be kept in mind that past performance is no guide to the future.

The top 10 per cent of funds under the system are awarded five FE Crowns, the next 15 per cent receive four Crowns and each of the remaining three quartiles get three, two and one Crown(s) respectively.

FE Analytics shows that there are only six funds from the IA Flexible Investment, IA Mixed Investment 40-85% Shares, IA Mixed Investment 20-60% Shares and IA Mixed Investment 0-35% Shares sectors with monthly income payouts and four or five crowns.

Performance of fund vs sector over 5yrs

 

Source: FE Analytics

Only one of these holds the highest crown rating of five: Jacob de Tusch-Lec and James Foster's £499.5m Artemis Monthly Distribution fund.

Over the past five years, the fund has made a 92.89 per cent total return, making it the best performing member of the IA Mixed Investment 20-60% Shares sector. An initial investment of £10,000 would have led to income payouts over £2,616 over this time.

Artemis Monthly Distribution aims to generate income and some capital growth through a portfolio of  global equities, bonds and cash. Equity manager de Tusch-Lec has built a strong track record on the Artemis Global Income fund while Foster is highly respected thanks to the performance of Artemis Strategic Bond.


However, the portfolio is not a composite of the two portfolios that the managers run individually. In a recent update, de Tusch-Lec said: “This could actually be viewed as a ‘best ideas’ fund: our best ideas, that is, for producing a high level of monthly income. In our equities, there is a significant degree of overlap between the fund’s holdings and the Artemis Global Income fund. But the two portfolios are not facsimiles. This fund tends to focus on the core income-producing stocks found in the Global Income fund with fewer of its ‘risk’ and ‘special situations’ holdings.”

Foster added: “The aims of the Artemis Monthly Distribution fund differ from those of the Artemis Strategic Bond fund – so its holdings differ too. Here, we have a more direct focus on income, so the portfolio has a more pronounced bias towards the high-yield bond market and fewer of the government bond and currency positions found in the Artemis Strategic Bond fund.”

Of the other five funds shortlisted in this article, three are managed by Fidelity’s Eugene Philalithis and Nick Peters. These are the £388m Fidelity Multi Asset Income, £21m Fidelity Multi Asset Balanced Income and the £21m Fidelity Multi Asset Income & Growth funds, all of which hold four FE Crowns.

All three portfolios aim to generate an income yield that is typically between 4 per cent and 6 per cent, with varying levels of capital growth as sub-aims. They each reside in separate sectors, giving different limits on their equity exposure.

Performance of fund vs sector over 5yrs

 

Source: FE Analytics

Square Mile Investment Consulting & Research gives Fidelity Multi Asset Income an ‘A’ rating. The research agency said:  The fund has been designed and is managed by an impressive team which operate independently from the rest of Fidelity Worldwide Investment, but who are able to leverage off of the wider resources within the group.

“We believe this is a strong and robust offering and worthy of consideration for those requiring an attractive regular income stream but who are not prepared to take on a significant level of risk in order to achieve it.”

Over the past five years, Fidelity Multi Asset Income has generated a total return of 44.58 per cent; this ranks it first in the IA Mixed Investment 0-35% Shares sector. An initial investment of £10,000 has paid out £2,079 over this time frame.

Jupiter Distribution is also on the shortlist with four FE Crowns. The £983.4m fund, the largest of the six mentioned in this article, is run by FE Alpha Manager Alastair Gunn and Rhys Petheram.

The four FE Crown-rated fund is split into two parts (roughly 70 per cent bonds and 30 per cent equities, depending on the economic conditions). Gunn looks after the equity portion of the fund while Petheram is in charge of bonds; both sub-portfolios are run independently although they work together on the asset allocation and fund’s overall strategy.


This is the second best performer of the IA Mixed Investment 0-35% Shares sector with a 44.30 per cent return over five years; it has paid out £1,556 on a £10,000 initial investment made a start of this period.

The final fund on the list is M&G Episode Income, which is headed up by FE Alpha Manager Steven Andrew with Maria Municchi as deputy. It has a four FE Crown rating.

Performance of fund vs sector over 5yrs

 

Source: FE Analytics

Like all of M&G’s multi-asset strategies, the fund is managed with the belief that having the flexibility to allocate capital between global asset classes in response to changes in asset valuations and understanding the behavioural and economic drivers of those valuations can lead to superior performance.

Square Mile, which gives the fund an ‘A’ rating, said: “We like this fund as it has well defined and quantifiable objectives in terms of income, growth and expected risk over the longer term. The lead manager is very clear on how he intends to meet the objectives and where he believes his edge lies. Whilst he has only been lead manager since 2010 he has around 15 years of investment experience, a large number of which has been focused on the fund's main driver of performance, macroeconomics.”

Over five years, the £722.7m fund has made a first-quartile 55.71 per cent total return while an initial investment of £10,000 has led to income payouts of £2,072.


This article is for professional investors only. You will be redirected to the News & Research homepage in seconds. If you are having problems getting to the page, please click here
Data provided by FE. Care has been taken to ensure that the information is correct, but FE 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.

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