Some of these funds are in unpopular sectors, from smaller groups or have shifted sectors and mandates.
Here we highlight five our data throw up that have a yield over 4 per cent. Many use unorthodox strategies to achieve this.
FP Omnis Distribution – 4.25%
The £33.3m FP Omnis Distribution fund will slip under the radar of most investors as it has limited availability through platforms.
The fund is offering a healthy yield of 4.25 per cent, however, from a mixture of assets: it sits in the IMA Mixed Investments 20%-60% Shares sector.
It has been managed by Bish Limbu since launch in March 2009 and he was joined by Colin Lunnon in May of last year, and is a result of collaboration between Octopus and the Openwork network.
It has an absolute yield target of 4 to 5 per cent unlike most equity income funds which benchmark themselves against the FTSE, aiming typically for 110 per cent or 115 per cent of the latter’s yield.
The portfolio has a fund of funds structure, and is currently only 41.7 per cent invested in equities with the rest in bonds, cash and alternatives.
The managers blend active and passive strategies, using the Vanguard FTSE AW High Dividend tracker fund along with active funds from M&G Artemis and JP Morgan within the global equity bucket.
The fund also holds the iShares FTSE UK Dividend Plus and SPDR S&P Dividend Aristocrats ETFs as well as ETFs for international bond exposure.
Active funds include a number of portfolios which use derivative to boost their income from Schroder, Fidelity and Legg Mason.
The fund has 10.1 per cent in a mixture of property and infrastructure as well as 10.4 per cent in cash.
Data from FE Analytics shows the fund has made 20.13 per cent over the past three years as the IMA Mixed Investment 20%-60% Shares sector has made 15.53 per cent.
Performance of fund vs sector over 3yrs
Source: FE Analytics
It has also outperformed over five years but has a tendency to lose a little more than the sector average in down markets and be slightly more volatile.
It has a relatively cheap annual management charge of 1.75 per cent.
Premier Optimum Income – 5.77%
The £51.4m Premier Optimum Income fund yields 5.77 per cent. Although it sits in the IMA UK Equity income sector it has done so only since March of last year, having previously sat in the IMA Europe ex UK sector.
Our data shows it has returned 39.68 per cent over three years, pretty much the sector average of 38.06 per cent.
Performance of fund vs sector over 3yrs
Source: FE Analytics
The fund is a portfolio of directly-held equities run by Chris Wright, who has the ability to write options to generate extra income. At the present time with markets going through the dividend-paying season Wright says he sees no need to do this.
The portfolio has 42.46 per cent in financials, with large positions in Dutch Insurer Delta Lloyd – 4.79 per cent – and hedge fund operator Man Group – 3.85 per cent among its off-benchmark positions.
The aim is to generate 4.5 per cent from high-yielding equities and a further 1 to 1.5 per cent from option-writing when it is necessary.
The holdings in financials have hurt the fund recently through the insurance sector which fell following dramatic changes in the budget.
The fund has ongoing charges of 1.14 per cent.
CF Miton Distribution – 5.41%
Alan Borrows has run the £137m CF Miton Distribution fund since April 2002. The fund was sold to Seneca Investment Managers by Miton earlier this year but has retained the same management team.
It sits in the IMA Mixed Investment 20%-60% Shares sector and currently has 49.4 per cent in equities as well as 30.1 per cent in bonds.
The yield is maintained at a high level with the help of payout from capital, which will have the effect of limiting capital growth potential.
It has a fund of funds structure, but the largest holding is in private company AJ Bell Holdings, which makes up 4.3 per cent of the fund. AJ Bell is an online stockbroker and investment platform.
The fund suffered in the market sell-off of 2011 but has been gaining ground on its peers since then and has returned roughly the same amount on a total return basis as the sector average despite its high yield.
Performance of fund vs sector over 3yrs
Source: FE Analytics
The fund has ongoing charges of 1.33 per cent.
Henderson UK Strategic Income – 4.4%
The £17m Henderson UK Strategic Income fund has been run by Paul Craig since November 2003.
However, after this month’s sale of the Cirilium range of fund of funds to Old Mutual, Paul Craig will be leaving the management of the portfolio, meaning that prospective investors might want to wait and see what happens.
Henderson say that the rest of the fund’s management team should be able to ensure stability and consistency of approach.
It is unusual in that it is a fund of investment trusts, offering diversified exposure to closed-ended funds which many investors find complex or intimidating.
Craig has managed to create a portfolio generating a yield of 4.4 per cent through a mixture of mainstream and specialist trusts.
FE Alpha Manager Alex Wright’s Fidelity Special Values rubs shoulders with the Greenwich Loan Income fund in the top 10, for example.
The fund has done extremely well over the longer term, but has displayed the characteristic of investment trusts to do very well in up markets and very poorly in down markets. The fund has ongoing charges of 1.69 per cent.
Marlborough Extra Income – 4.1%
The £16m Marlborough Extra Income fund doesn’t get the attention of its more famous stablemates run by FE Alpha Manager Giles Hargreaves and his team, but with a yield of 4.1 per cent and five FE crowns maybe it should.
Nigel Beidas and Matthew Rainbird’s portfolio sits in the IMA Equity & Bond Income sector which is often overlooked by investors.
The fund has done extremely well under their tenure, returning 88.89 per cent over five years as the average fund in the sector has made just 46.14 per cent.
Performance of fund vs sector over 5yrs
Source: FE Analytics
It holds only 22.4 per cent in bonds, the bulk of it in the UK, which has been a fairly consistent asset weighting.
Like Marlborough’s other funds, it has a large number of holdings, 137 in total, with the largest position worth just 1.9 per cent.
It also has the multi-cap approach which is so popular at the moment, although more than half its equity weighting is at the larger end of the spectrum. It is available with ongoing charges of 0.85 per cent.
