Woodford alternatives: The best performing UK equity income funds over 10 years

Monday, October 21, 2019 - 14:31

The only positive that investors are likely to take from the Woodford situation is that there is an end in sight and those in the Equity Income fund will get their first return of capital in January, after the first tranche of assets have been sold off. They will then receive any remaining money as and when the fund’s assets are sold. Those who want to continue investing in UK stocks for income will need to find a new home for their cash.

UK equity funds in general have been unloved since the Brexit referendum in 2016, with investors withdrawing more than £14bn during that time. In the past year alone almost £4bn has been taken out of UK equity funds by investors. However, UK equities have fallen in value and are now offering a decent yield for investors, with the FTSE 100 as a whole forecast to yield 4.8% for 2019.

Clearly Woodford has taught us that past performance is no guide to future returns, but it still serves as a useful tool to see how a fund has performed. This is particularly the case with income funds, as we can see how much the manager prioritises income payouts in their management of assets, and how they balance this with capital returns. It’s all well and good having sizeable income payouts, but you don’t want to see your capital fall as a result.

By looking at the top funds for capital growth, income and total return over the past 10 years, and the funds that have delivered across all three, we can see the consistent performers. Investors don’t have a swathe of options, as just 42 funds in the sector have a 10-year track record and more than £250m in assets. Of those just four funds have managed to come in the top 10 at the same time for capital growth, income and total return.

Income seekers could look to MI Chelverton UK Equity Income, which appears on all three top 10s but comes top for income. If you invested £10,000 a decade ago, the £627m fund has handed investors £8,491 in income alone. During that time it has also achieved capital growth of 97.3%, meaning that same investor who had taken the income would have seen their initial £10,000 investment turn into £19,730.

Those who don’t need the income now will be more focused on total return, where income is automatically reinvested back into the fund. The MI Chelverton UK Equity Income has also come top here, as its hefty income payout has pushed the total return higher, to 234.8% over the past decade. A close second is the Unicorn UK Income fund, which has handed investors a 225.4% total return over that period, turning the £10,000 initial investment into £32,540 today. It is important to note that both of these funds invest heavily in smaller companies and so potentially carry higher risk.

Investors who want to receive an income but still want to see their initial investment grow as much as possible, should look at the capital return figures as well. The £770m Franklin UK Equity Income fund comes top for capital returns, with a 125.5% return, which assumes someone had drawn off the income during that time.

The three top 10s

Top 10 by Income

Fund Fund Size(m) 10-year capital return 10-year total return 10-year income earned
MI Chelverton UK Equity Income* £627 97.3% 234.8% £8,490.90
Unicorn UK Income* £615 115.6% 225.4% £7,573.95
Schroder Income Maximiser  £1,181 (6.6%) 91.0% £7,480.60
Franklin UK Equity Income* £770 125.5% 151.1% £6,499.21
JOHCM UK Equity Income £2,800 49.1% 139.5% £6,389.31
M&G Charifund  £1,124 47.8% 141.8% £6,376.34
Royal London UK Equity Income £2,036 87.8% 184.9% £6,270.55
BNY Mellon UK Income  £1,265 79.5% 116.8% £6,141.33
Premier Income £304 38.0% 120.6% £6,135.12
Janus Henderson UK Equity Income & Growth £252 62.8% 138.7% £5,972.95

Source: FE/AJ Bell. Income figure based on £10,000 invested. * denotes those that appear in all 3 top 10 lists. Data to 10/10/19.

Top 10 by Total Return

Fund Fund Size(m) 10-year capital return 10-year total return 10-year income earned
LF Lindsell Train UK Equity  £6,920 242.1% 330.6% £4,527.97
Liontrust Special Situations £4,960 237.5% 294.4% £3,901.99
TB Evenlode Income £3,444 138.8% 242.0% £5,599.64
MI Chelverton UK Equity Income* £627 97.3% 234.8% £8,490.90
Unicorn UK Income* £615 115.6% 225.4% £7,573.95
Montanaro UK Income £420 105.8% 192.1% £5,702.80
Royal London UK Equity Income £2,036 87.8% 184.9% £6,270.55
Troy Trojan Income £3,177 72.4% 156.6% £5,531.97
Threadneedle UK Growth & Income £308 81.0% 155.0% £4,908.56
Franklin UK Equity Income* £770 125.5% 151.1% £6,499.21

Source: FE/AJ Bell. Income figure based on £10,000 invested. * denotes those that appear in all 3 top 10 lists. Data to 10/10/19.

Top 10 by Capital Return

Fund Fund Size(m) 10-year capital return 10-year total return 10-year income earned
LF Lindsell Train UK Equity  £6,920 242.1% 330.6% £4,527.97
Liontrust Special Situations £4,960 237.5% 294.4% £3,901.99
TB Evenlode Income £3,444 138.8% 242.0% £5,599.64
Franklin UK Equity Income* £770 125.5% 151.1% £6,499.21
Unicorn UK Income* £615 115.6% 225.4% £7,573.95
Montanaro UK Income £420 105.8% 192.1% £5,702.80
Invesco Income & Growth £403 104.6% 131.7% £5,926.75
MI Chelverton UK Equity Income* £627 97.3% 234.8% £8,490.90
Jupiter Income Trust £1,820 90.6% 107.8% £5,827.68
Royal London UK Equity Income £2,036 87.8% 184.9% £6,270.55

Source: FE/AJ Bell. Income figure based on £10,000 invested. * denotes those that appear in all 3 top 10 lists. Data to 10/10/19.

Only four UK equity income funds come in the top 10 for all three of these metrics over the past 10 years - capital return, income and total return:

Fund Fund Size(m) 10-year capital return 10-year total return 10-year income earned
MI Chelverton UK Equity Income £627 97% 235% £8,491
Unicorn UK Income £615 116% 225% £7,574
Royal London UK Equity Income £2,036 88% 185% £6,271
Franklin UK Equity Income £770 126% 151% £6,499

Source: FE/AJ Bell. Income figure based on £10,000 invested. Data to 10/10/19.

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.

These articles are for information purposes only and are not a personal recommendation or advice.


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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.