Key income funds for your portfolio

Equity Income sector

Equity Income funds invest in a portfolio of dividend-paying companies to provide investors with a steady stream of income with the added benefit of long-term growth.

The Insight UK Equity Income Booster fund has the most attractive level of income, with an impressive yield of 8.73 per cent.

Managed by Tim Rees and launched in March 2009, the fund only has a short-track record but has returned 15 per cent over the last 12 months.

The Schroder Income Maximiser fund has a good record over a longer five-year track record and currently has a yield of 8.1 per cent.

Also worth a look is FE Alpha Manager John McClure’s Unicorn UK Income portfolio. The fund has a solid 5.3 per cent yield and, by focusing on small caps, has managed to return 50 per cent over the last five years.


Equity & Bond Income sector

Similar to Equity Income funds, investments in this sector also have the flexibility to allocate to various bond instruments if the manager thinks the global macro-economic climate warrants it.

One fund that has managed to combine a decent yield with consistent growth is the Ecclesiastical Higher Income portfolio. FE Alpha Manager Robin Hepworth is the top performer over three-, five- and 10-year periods and has achieved a decent 4.2 per cent yield.


Corporate Bond sector

The £118m IFDS Brown Shipley Sterling Bond fund has the most attractive income of all the funds that invest in UK company debt, with a yield of 6.5 per cent.

Investors may also be interested in the Schroder All Maturities Corporate Bond fund. It is headed up by FE Alpha Manager Adam Cordery and has a yield of 5.8 per cent.

Over the last five years it has returned 28 per cent compared with 10 per cent from the sector average.


High Yield Bond sector

High Yield Bond funds invest predominantly in non-investment grade bond securities with a credit rating of BBB minus or lower. These junk bonds are higher risk but offer considerably higher rewards.

Investors focused purely on income will be interested in the Marlborough High Yield Fixed Interest fund. Its 10.71 per cent yield is one of the highest of any instrument in the IMA universe.


Global Bond sector

There are a number of instruments in the Global Bond sector with yields upwards of 6 per cent.

However, Capital International Global High Income Opportunities and Threadneedle Emerging Market Bond are the most consistent performers over a 10-year period.

With yields of 6.1 per cent and 6.3 per cent respectively, they certainly represent an attractive proposition for income investors who wish to diversify their portfolios with global exposure.

The Threadneedle fund is headed-up by FE Alpha Manager Richard House.


Property

An increasing number of investors are fleeing the volatile bond market and buying up commercial property funds. As reported in the Financial Times, this is pushing up prices in prime real estate assets and yields are barely able to keep up with inflation.

The pick of the property income payers is Henderson UK Property with a yield of 4.68 per cent; however, the overall performance of the fund has not been as strong as others in the sector.

Over five years the £832m portfolio has lost investors 15 per cent.