Of the eight income-focused European funds with a long enough track record, not one has beaten the average Europe ex UK fund, which has returned 28.8 per cent.
The average European equity income fund in the sector has returned 20.47 per cent during this time.
Performance of European equity income funds vs sector
| Name |
3-yr return (%) |
Yield (%) |
| IMA Europe ex UK |
28.8 |
N/A |
| SWIP European Income |
26.92 |
4.30 |
| F&C European Growth & Income |
26.08 |
1.20 |
| PSigma European Income |
23.17 |
4.26 |
| Royal London European Income |
22.22 |
5.45 |
| Ignis Argonaut European Income |
19.55 |
5.36 |
| Invesco Perp European Equity |
19.04 |
4.01 |
| Jupiter European Income |
16.63 |
4.10 |
| Newton European Higher Income |
10.95 |
7.13 |
Source: FE Analytics
While a number of high-profile European equity income vehicles have come to market in the last three years or so, including the £586m Standard Life European Equity Income fund, as a group they have struggled to keep up with the total return of pure growth European funds in the sector.
Indeed, some of these underperforming vehicles have even failed to generate a decent level of income. According to FE Analytics, the £174m F&C European Growth & Income fund has a one-year historic yield of just 1.2 per cent.
This is even more disappointing given that a number of pure growth European funds are yielding more than this level. Henderson European Equity Enhanced, for example, has a one-year historic yield of more than 3 per cent.
Performance of average fund vs sector over 3-yrs
Source: FE Analytics
While income funds tend be viewed as more stable than pure growth funds, they have failed to weather the volatility so far this year any better than their peers. Since 1 August when the markets took a turn for the worse, the average income-focused European fund has lost 14.72 per cent, outperforming its sector by a mere 0.39 per cent.
It is a similar story in the IMA Europe inc UK sector; of the four income-focused vehicles in the sector, only one – Capital International European Growth and Income – has beaten its sector average over three years.
Mark Denning’s vehicle has returned 38.69 per cent since November 2008, outperforming the average Europe inc UK fund by 3.55 per cent. It is currently yielding 2.55 per cent.
A recent FE Trustnet article highlighted the poor performance of the highest-yielding UK Equity Income funds, which FE Alpha Manager Francis Brooke attributed to their inability to balance capital growth with a decent level of income. However, the sacrifice of growth has been even more extreme in the European sectors.
Ben Yearsley, investment research manager at Hargreaves Lansdown, believes there is a severe shortage of strong single-country equity income funds on offer to retail investors.
"We have huge demand for UK and global equity income funds, but we get little interest in single-country income products because there are not enough of them on the market," he said. "It's difficult to invest in a fund that has only a handful of competitors, as there is no room for any meaningful comparison."