Many investors are continuing to search for supplementary income given the poorer returns currently available through high street deposit accounts. Throughout 2009 many investors were drawn to the Corporate Bond market by the attractive yields and the significant capital growth on offer. The potential rewards the debt markets offered at this time are not likely to be seen again.
However, the emergence of strategic and tactical bond funds such as this one has allowed the managers freedom to change their strategy to identify the best opportunities within debt markets as they arise.
Rathbone Income fund, managed by Carl Stick (pictured below left)
The UK equity income sector is one of the most popular and includes some of the best and most well-respected managers. It is often surrounded by speculation as to the real flexibility the managers have and the diversity they offer investors. This fund has been chosen as we believe Carl Stick has the ability and mandate to provide real overall portfolio diversification, searching for the very best companies across the entire market cap spectrum.
The fund currently includes approximately 40 per cent of its assets in FTSE 250, FTSE Small Cap and AIM listed companies.
Standard Life European Equity Income fund, managed by Will James (pictured right)
Income-seeking investors who would usually stick within the UK are gradually becoming aware of the opportunities from abroad. The wider global arena not only offers growth, but also has the potential to provide true income diversification across companies and sectors. By including Europe, there is also much less reliance on the large cap constituents of the UK.
This fund also benefits from the proven success of the Standard Life winners list approach, whereby the investment teams are given the group's preferred companies within the region. This means that if a company is on the winners list and meets a fund's investment objectives, it must be held in the portfolio.
Premier Monthly Income fund, managed by Chris White (pictured below left)
This fund currently offers investors an income yield above the sector
and market average. Unlike many other UK equity income funds, it can offer investors a monthly income stream from an equity-based
fund. Chris White has only managed the fund since December 2010; however, he has a proven track record in the sector from his previous management roles. Chris uses a combination of top-down and bottom-up analysis and enforces the strict requirement that a company yield must be 3 per cent or above to be included in the portfolio.
This is another of the smaller UK equity income funds that allows the manager greater flexibility in stock selection. Approximately a third of the portfolio is invested in mid to small cap companies.
Standard Life UK Equity Income Unconstrained fund, managed by Thomas Moore (pictured right)
For many investors, choosing which UK equity income fund is right for
them can be a difficult task as there tends to be a strong correlation
across many of the top holdings. However, this fund offers true
versatility across the market cap spectrum. This fund is run on a concentrated approach, ensuring holdings are included in the portfolio for a specific reason and not simply held as a small tail holding offering little in terms of income or capital appreciation.
Despite only taking over management of the fund in January 2009, Thomas Moore has clearly shown his ability to identify potential winners from outside the more traditional equity income basket, proving that versatility and small cap size can work.
Martin Currie Latin America fund, managed by Jeff Casson
It is highly unusual for us to include a fund with hardly any track record, and given this fund was only launched in November 2010, there is little performance of note given the volatile nature of the markets during 2011 so far.
However, it is the fund manager, Jeff Casson that attracts us. Casson is respected for his experience in investing in Latin America.
A key region within this fund is Brazil, by far the largest country within the investment region, with a growing young and vibrant population helping to generate an increasing internal consumer market, which will increase its investment potential.
Threadneedle UK fund, managed by Simon Brazier
This fund aims to achieve capital growth by investing predominantly in UK companies and has been managed by the highly impressive Simon Brazier since he joined Threadneedle from Schroders in April 2010.
For inclusion, Brazier assesses a company's valuation, business model and ability to focus on cash-flow generation. To help minimise the level of risk, diversification within the fund is key and Brazier is not afraid to search across the market cap spectrum or to include companies or sectors that are seen as out of favour.