Skip to the content

The funds with a higher yield than the FTSE All Share

14 February 2020

Trustnet finds out which funds are yielding more than the UK stock market, while producing strong total returns.

By Gary Jackson,

Editor, Trustnet

More than 180 funds are yielding more than the FTSE All Share, Trustnet research has found, although only a small number of these have generated the highest total returns of their sector over the past year.

Income remains in constant demand and the UK stock market is seen as one of the world’s best hunting grounds for yield-seeking investors.

At the end of January 2020, the FTSE All Share had a yield of 4.24 per cent and in this article we reveal the funds in the Investment Association universe that currently a yield more than that.

The average fund of the 4,050 examined in this research has a yield of just 1.72 per cent, although this includes many strategies that are not investing with the explicit aim of generating income.

In terms of sectors, only three of the 39 Investment Association peer groups have an average yield higher than the FTSE All Share’s 4.24 per cent.

The highest is IA Global EM Bonds - Local Currency, where the average member has a yield of 5.53 per cent, followed by IA UK Equity Income (4.63 per cent) and IA Global EM Bonds – Blended (4.59 per cent).

The IA UK All Companies sector, which is the largest peer group, has an average yield of 2.45 per cent while IA Global, which has attracted a swell of inflows in recent years, is yielding 1 per cent.

At the very bottom of the sector rankings, however, is the IA North American Smaller Companies sector with its average yield of just 0.18 per cent reflecting the fact that this is very much a ‘growth’ part of the global stock market.

Also posting relatively low average yields are sectors like IA Technology & Telecommunications (0.22 per cent), IA UK Index Linked Gilts (0.44 per cent), IA Japanese Smaller Companies (0.63 per cent), IA Europe Including UK (0.70 per cent) and IA North America (0.81 per cent), as well as the two money market peer groups.

 

Source: FE Analytics

When we look at individual funds, 184 have a yield in excess of the FTSE All Share’s 4.24 per cent. The highest yield on offer comes from Delphine Arrighi’s £384m Merian Local Currency Emerging Market Debt fund.

It is yielding 9.1 per cent, which – as its latest annual report explained – is down to a focus on countries where “real yields are high, inflation under control and the easing cycle in developed economies is likely to be replicated”. This led to exposure to areas such as Indonesia, Egypt, Russia, Kenya and Nigeria.

Other IA Global EM Bonds - Local Currency funds such as Quilter Investors Emerging Markets BondThreadneedle Emerging Market Local and Baillie Gifford Emerging Markets Bond have some of the highest yields in the Investment Association universe.

All four of the emerging market debt funds mentioned are in their peer group’s top quartile for total returns over the past 12 months, which is an important consideration when yield is concerned.

In addition to being high because a good level of income has been paid out, yields can be high because a fund has been hit with falls in its capital value.

The most eye-catching example of this in the above table is LF ASI Income Focus. This fund has the second highest yield in the IA UK Equity Income at 7.16 per cent, but this is down to the fact that it posted an 18.68 per cent loss in the 12 months to the end of January 2020.

LF ASI Income Focus was previously managed by Neil Woodford until lacklustre performance, heavy outflows and fund suspensions caused the former star manager to close his investment firm last year. Aberdeen Standard Investments’ Charles Luke and Thomas Moore took over the portfolio in December.

 

Source: FE Analytics

The above table shows all the funds that have a yield higher than the 4.24 per cent from the FTSE All Share and have made top-quartile returns over the past 12 months.

Several emerging market debt funds can be seen on that list, but there’s also quite a few members of the IA UK Equity Income sector.

Three of these funds – Premier Optimum IncomePremier Income and Premier Monthly Income – are headed up by Chris White. The manager uses a process that blends both top-down and bottom-up elements, resulting in a slight bias towards the value style and a focus on finding consistent natural income.

UK equity income strategies that have a bias towards small-caps have also done well, despite this sector being dominated by large-cap dividend payers.

Marlborough Multi Cap Income and Unicorn UK Ethical Income both look outside the FTSE 100 for their holdings and have generated strong returns and income streams by investing in smaller companies.

We also looked at which funds have a higher yield than the FTSE All Share and hold an FE fundinfo Crown Rating of five, which indicates superior performance when it comes to stockpicking, consistency and risk control over the past three years.

Only 13 funds out of the Investment Association tick both of these boxes, with the best-known examples being Invesco Monthly Income Plus, Royal London Sterling Extra Yield Bond, Premier Multi-Asset DistributionMan GLG UK Income and Kames Diversified Monthly Income.

Editor's Picks

Loading...

Videos from BNY Mellon Investment Management

Loading...

Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.