Income investing Holy Grail – 4 funds that have delivered impressive income and capital growth

Laura Suter
15 October 2018

•    Top fund has delivered £8,905 of income on a £10,000 investment over 10 years
•    Best total return has turned £10,000 into £41,000 over 10 years
•    Four funds appear in the top ten for income, capital growth and total return – all have delivered total returns higher than 200%

 

Fund

10 year capital return

10 year total return

10 year income produced

Unicorn UK Income

180.35

309.69

£8,905.29

MI Chelverton UK Equity Income

131.71

310.91

£8,361.98

Montanaro UK Income

164.32

276.74

£6,351

Royal London UK Equity Income

109.27

220.48

£6,087.63

Notes: Income figure based on £10,000 invested. Source: AJ Bell

Notes: Income figure based on £10,000 invested. Source: AJ Bell

 

Separate top ten tables for income, capital return and total return, as well as the methodology of the research, are provided at the end of this release.


Laura Suter, personal finance analyst at investment platform AJ Bell, comments:


“Income investors, particularly those in retirement, want the holy grail of a steady income stream but not at the expense of capital growth. The data shows the value of moving away from some of the big income names in order to achieve this. 


“Unicorn UK Income, a fund not known to many investors, has delivered almost 90% of your original investment back in income alone over 10 years. On top of that, if you’d taken that income your original £10,000 investment would have grown to £28,000.


“MI Chelverton UK Equity Income is another fund that has delivered stellar income as well as capital growth. It has handed investors almost £8,400 of income over the past 10 years and turned the original £10,000 investment into £23,200. For those that bought the ‘accumulation’ units of the fund and reinvested the income, their original investment would have turned into £41,000.


“Some funds are a choice between income and capital growth – so are top for income but have delivered much more muted price returns. Schroder Income Maximiser, for example, has handed investors almost £7,850 of income over the past 10 years, based on £10,000 invested, but has only grown the original capital to £12,034 in that time. 


“This fund sits within a group of funds called ‘income maximiser’ or ‘income booster’, which prioritise income over capital growth. These funds generate some income by using ‘derivatives’, which sell some of the potential future growth of the fund’s holdings in exchange for a fee that is used towards the fund’s income. It means when markets rise the fund will likely not increase as much as its peers. This approach works for investors who want maximum income in the short term and aren’t as concerned about growing their original capital. 


“There’s no clear style winner among the top income funds, although those that have managed to deliver the highest income alongside impressive capital growth have focused on smaller companies – which have soared in recent years. Unicorn, Chelverton and Montanaro all fall into this bracket. 


“However, there is a broad spread between value strategies, funds using derivatives, small-cap focused funds and those invested predominantly in large caps. The funds also range from multi-billion pound giants to much smaller funds, offering something for most investors.


“There are just 36 funds that have a 10-year track record and have more than £250m in assets – showing how hard it is for investors to find income funds that have staying power. The 10-year limit means some well-known names such as Neil Woodford or Evenlode Income are excluded for not having sufficient track record.”

 

Top 10 by income

Fund

10 year capital return (%)

10 year total return (%)

10 year income produced (£)

Unicorn UK Income*

180.35

309.69

£8,905.29

MI Chelverton UK Equity Income*

131.71

310.91

£8,361.98

Schroder Income Maximiser

20.34

148.05

£7,847.05

JOHCM UK Equity Income

100.77

227.6

£7,080.62

Montanaro UK Income*

164.32

276.74

£6,351

Schroder UK Alpha Income

64.24

157.7

£6,257.09

Royal London UK Equity Income*

109.27

220.48

£6,087.63

Newton UK Income

72.6

128.58

£6,050.78

Premier Income

53.3

149.57

£6,016.64

Troy Asset Management Trojan Income

68.53

157.92

£5,832.58

Notes: Income figure based on £10,000 invested. * denotes those that appear in all 3 top 10 lists. Source: AJ Bell

 

Top 10 by total return

Fund

10 year capital return (%)

10 year total return (%)

10 year income produced (£)

MI Chelverton UK Equity Income

131.71

310.91

£8,361.98

Unicorn UK Income

180.35

309.69

£8,905.29

Montanaro UK Income

164.32

276.74

£6,351

JOHCM UK Equity Income

100.77

227.6

£7,080.62

Royal London UK Equity Income

109.27

220.48

£6,087.63

Schroder Income

99.84

197.15

£5,413.04

SLI UK Equity Income Unconstrained

86.69

181.99

£5,731.61

Threadneedle UK Equity Income

81.48

181.07

£5,584.43

Janus Henderson UK Equity Income & Growth

87.41

177.04

£5,450.93

Aviva Investors UK Equity Income

139.85

174.98

£4,038.06

Notes: Income figure based on £10,000 invested. Source: AJ Bell

 

Top 10 by capital return

Fund

10 year capital return (%)

10 year total return (%)

10 year income produced (£)

Unicorn UK Income

180.35

309.69

£8,905.29

Montanaro UK Income

164.32

276.74

£6,351

Aviva Investors UK Equity Income

139.85

174.98

£4,038.06

MI Chelverton UK Equity Income

131.71

310.91

£8,361.98

Franklin UK Equity Income

120.43

158.97

£5,709.34

Invesco UK Strategic Income

115.17

156.46

£5,154.72

Jupiter Income Trust

110.1

141.19

£5,517.00

Royal London UK Equity Income

109.27

220.48

£6,087.63

Invesco High Income

102.34

138.68

£5,008

Invesco Income & Growth

100.97

139.33

£5,362.10

Notes: Income figure based on £10,000 invested. Source: AJ Bell

Notes: The data looks at members of the UK Equity Income sector, and those that were originally in the sector but were kicked out in recent years for not meeting the yield target. Only funds above £250m and with a 10-year track record have been listed. The full list is available on request.

Laura Suter
Personal Finance Analyst
Laura Suter is personal finance analyst at AJ Bell. She is a multi-award winning former financial journalist, having specialised in investments. Laura joined AJ Bell from the Daily Telegraph, where she was investment editor. She has previously worked for adviser publications Money Marketing and Money Management, and has worked for an investment publication in New York. She has a degree in Journalism Studies from University of Sheffield.
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