Six of the 10 most-bought funds in October are income generative, and investor appetite for UK equity income funds also remains strong.
However, Asian and global portfolios from Newton saw higher returns than any single UK fund, and six out of the 10 funds had an ex-UK focus.
Most-bought funds via The Share Centre in October
| Position | Fund | Yield |
|---|---|---|
| 1 | Legal & General UK Index | 3.10% |
| 2 | Newton Asian Income | 4.92% |
| 3 | Newton Global Higher Income | 4.3% (As at 30 September) |
| 4 | Invesco Perpetual Monthly Income Plus | 6.53% |
| 5 | First State Global Emerging Markets Leaders | 0.55% |
| 6 | Invesco Perpetual High Income | 3.83% |
| 7 | Jupiter Global Managed | 0.40% |
| 8 | M&G Global Dividend | 3.46% |
| 9 | Artemis Income | 4.70% |
| 10 | Aberdeen Emerging Markets | 0.50% |
Source: The Share Centre
Andy Parsons, head of research at The Share Centre, said: "Our research shows that investor appetite for income remains high as they seek to plug the gaps created by diminishing savings interest rates."
"In addition, investors are unafraid to look far afield for this income, as global and emerging markets funds make up a high proportion of our most popular funds."
It should be noted that Legal & General UK Index is the default fund used by The Share Centre, so its ranking as the most-sold should be taken in that context.
The next most-sold fund was the five crown-rated Newton Asian Income portfolio, and Parsons says that it is benefiting from reduced headwinds in Asia.
"As the slowdown in Asia is widely considered to have hit rock-bottom, investors have rushed to push Newton Asian Income into second place from last month’s seventh," he explained.
"Managed by the highly successful Jason Pidcock, the fund provides approximately equal returns from income and capital growth."
"The fund hunts for high quality and sustainable companies that increase their dividends through earnings growth, providing a more stable income stream for investors seeking returns away from the UK shorelines."
According to FE Analytics, the £2.6bn Newton Asian Income fund was launched in 2005 and is a top-quartile performer over one, three and five years.
Performance of fund vs sector over 5-yrs
Source: FE Analytics
It is currently yielding 4.92 per cent and is the second-best performing fund in the IMA Asia Pacific ex Japan sector over a five-year period, with returns of 83.15 per cent.
The fund requires a minimum investment of £1,000 and has a total expense ratio (TER) of 1.66 per cent.
Newton Global Higher Income and M&G Global Dividend are the other ex-UK income funds on the top-sellers list, proving the popularity of the theme.
They join UK funds Invesco Perpetual High Income, Artemis Income and Invesco Perpetual Monthly Income Plus – the last fund sitting in the IMA Sterling Strategic Bond sector but holding a mixture of fixed interest investments and equities.
McCarthy Taylor’s Philip Haden thinks that investors are right to concentrate on equity income, and he is currently advising his clients to adopt such defensive portfolios.
However, he says there is no need to add risk by looking abroad for income and that investors should still concentrate on the UK.
"I can totally understand the point of view of investors increasing their exposure to income funds," Haden commented.
"They are a very good choice at the moment because you are still getting exposure to the growth of equities but it is a more defensive and less volatile approach; they basically allow investors to mitigate risk."
"However, the advice we are giving at the moment is to focus on UK Equity Income funds as you get a high amount of global exposure as the companies they invest in are usually large multi-nationals."
He added: "We don’t advise investing directly in global and Asian sectors because you want to avoid currency issues and political tail risks. There is no need to overlook the UK income sector, as by investing there you get so much international exposure anyway."